Before we understand the concept associated with Section 24 of the Income Tax Act 1961, we first need to understand the meaning of the word Income from House Property. Only then will we be able to grasp the meaning of Section 24 of the Income Tax Act 1961 which is an important provision in the Income Tax Act.
Meaning of Income from House Property
Under the Indian Income Tax Act, income from the property is considered taxable.
The tax is calculated on the commercial establishment which is either used by the owner for residential purposes or leasing and renting purposes. The income which is earned through renting or leasing the house property is generally termed as Income from House Property. Property can include a residential house, office building, shop, factory, hall, etc, and any land associated with the building (e.g. garden, compound, playground, car parking space, etc).
Income from property is one of the few sources of income where the borrower needs to pay tax not only on actual income but also on deemed rental from the property in some cases. The deemed rental is calculated based on an assessment of the potential income that a property is capable of earning.
Income from self-occupied property, rented-out property, and deemed income from vacant property (including houses), other than the oneself-occupied house, is taxable under the head of “Income from property”.
What Are The Deductions Available Under Section 24?
Now we come to the concept associated with Section 24 of the Income Tax Act 1961. Section 24 deals with the Standard and the Special Deductions which are levied along with the total tax liability obtained from the total income earned by the individual entity or the business ownership venture. Following is the classification of the two different parts of Section 24 of the Income Tax Act 1961-
(i) Standard deduction for repairs and maintenance of the property equal to 30% of the gross annual value after deducting municipal taxes is allowed as deduction even when your actual expenditure on the property is higher or lower than this self-occupied self-occupied property, where the annual value of the property is taken as nil, the standard deduction is not allowed.
(ii) Deduction for actual interest paid on a home loan on the property for purchase/construction/repairs: This deduction is availed for all categories of properties whether it is rented or deemed to self-occupied self-occupied, however with differences in the allowable amounts for rented or deemed to be on a rent self-occupied self-occupied property.
Exemption under Section 24 of the Income Tax Act 1961
Section 24 of the Income Tax Act lets homeowners claim a deduction of up to Rs. 2 lakhs (Rs. 1,50,000 if you are filing returns for the last financial year) on their home loan interest if the owner or his family resides in the house property. The entire interest is waived off as a deduction when the house is on rent.