If you are a salaried individual with an income of less than Rs 50 lakh and one house property, you should be aware that you need to file ITR-1 (Sahaj). After you have filled the breaks on your salary in the Sahaj form, you can proceed with the details on your house.
Some points before you start:
Income from one house property means the taxpayer has only one residential property registered in his/her name. This property can be let out or self-occupied, in either case, it has to be used for residential purposes and not for business.
Type of property: Self-occupied or let-out?
You will first need to choose if your property is self-occupied or let-out. Self-occupied can mean either of these:
- The house is used by you or your parents or your spouse or children.
- The house is empty because you work/live in a different location or with your parents.
If you are renting it out to a tenant because you do not live in that house (for any reason), the property is 'let-out.'
If your property is self-occupied, your annual value of the property will be nil and you can jump to the part-v (interest on borrowed capital) if you are paying the interest on a home loan to purchase the said property.
You can only claim the interest you paid in the financial year 2017-18 (the year which you are filing the income tax returns for) and you can find the information in your home loan statement from the bank.
You can claim a maximum of Rs 2 lakh under "interest on borrowed capital" irrespective of how much you paid. Since the value of your property is nil, you will get a negative value under "income chargeable under the head 'income from house property'" if you had paid interest on house loan. This will help bring down your overall taxable income.
If you have chosen the 'let-out property' option, you are required to file:
1. Gross rent received/receivable:
The amount is made up of the higher value of actual rent received or receivable or expected rent.
Actual rent received is what you have got from your tenant including the arrears. Expected rent is the municipal valuation on the rent for your property or the standard rent in states governed by the Rent Control Act.
Local authorities conduct surveys on house properties to determine how much rent they should be paying, which is why they will have a municipal valuation of your property. On the other hand, standard rents are to be followed in states governed by the Rent Control Act and the landlord is not allowed to charge more than the rate fixed by the authorities.
Follow these steps to arrive at the gross rent receivable/received:
a. Find the municipal valuation or standard rent.
b. Calculate the actual rent received or receivable.
c. Take the higher value between a and b.
2. Taxes paid:
The taxes that you have paid to your local authority for the financial year 2017-18 should be filled in the space given. It will be mentioned in the challan given by the municipality office.
3. 30% of annual value for standard deduction:
The form automatically calculates 30 percent of the annual value after you have entered gross rent and taxes. You are allowed a standard deduction of 30 percent under the head irrespective of your actual expenditure.
4. Interest payable on borrowed capital
Unlike self-occupied property, you can enter actual interest paid on the home loan with no limits. However, the loss under income from house property can only be claimed to a limit of Rs 2 lakh and the rest can be carried forward.
For example, your income from the house (rent minus taxes) comes to Rs 1 lakh and the interest on your home loan for FY 2017-18 has been Rs 4 lakh, you will face a loss of Rs 3 lakh. Out of this, you can claim loss of only Rs 2 lakh and forward the Rs 1 lakh to the next financial year. (Note that you will have to file other ITR forms to carry forward the loss as ITR-1 has no provision to do it.)