You may own one or more properties. Sometimes they generate rental income; other times, they may remain vacant or yield little return. When the expenses on a property exceed the income earned or expected, you incur a loss from house property.

Knowing how to calculate and report this loss is crucial, as it can help reduce your overall taxable income. This article explains the loss from house property meaning, how to compute it accurately, the provisions of loss from house property Section 24 of the Income Tax Act, and how you can claim and carry forward this loss for tax benefits.

What Is Loss from House Property?

A loss from house property occurs when your total allowable deductions (such as interest on a home loan plus a standard deduction) exceed the income calculated under the head “Income from House Property”.
When this happens, you have an income loss from house property (i.e., negative income from that head). This means you will show a loss under “Income from House Property” in your tax return, and this can be set off or carried forward as per prevailing laws.

Loss from House Property Section 24

The head “Income from House Property” and how it can result in a loss are heavily governed by Section 24 of the Income Tax Act, 1961. Under the loss from house property Section 24, you get two key deductions:

• A standard deduction of 30% of the Net Annual Value (NAV) from rental income for let-out properties.
  
• A deduction for interest on borrowed capital (i.e., home loan interest) under Section 24(b).
  
• For a self-occupied property, the deduction limit is INR 2 lakhs (not available under the New Tax Regime).
• For a let-out property, there is no upper limit on the amount of interest that can be claimed as a deduction under Section 24(b), irrespective of the tax regime.However, under Section 71, only up to INR 2 lakhs of such loss can be set off against other heads of income in a financial year; any remaining loss can be carried forward for up to eight years. 

Computation of Loss from House Property

Here’s how you calculate the loss from house property step by step.

• Determine Gross Annual Value (GAV) – If the property is let out, actual rent received or receivable; if self-occupied, GAV is nil (for most practical cases).
  
• Deduct municipal taxes paid during the year to arrive at Net Annual Value (NAV).
  
• Deduct the standard deduction (30% of NAV) for let-out properties.
  
• Deduct interest on home loan, if applicable (as per Section 24(b)).
  
• The remainder is income from house property. If negative, this is your loss from house property.

Special Cases & Exceptions

Here are important edge cases & exceptions you should know about:

• Multiple Properties: You can treat up to two houses as self-occupied; any additional ones are considered let-out or deemed let-out. 
  
• Under-Construction or Unpossessed Property: Interest deduction for self-occupied property may be capped (INR 30,000)  if the construction or purchase is not completed within five years from the end of the financial year in which the loan was taken.
  
• New Tax Regime: Many deductions under Section 24 are not available, especially for self-occupied properties.
  
• Vacant Let-Out Property: If unrented, actual rent may be nil, but deemed GAV and deductions can apply under conditions.

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Example Calculation of Income Loss from House Property

Example 1 – Self-Occupied Property

Example 2 – Let-Out Property

In both cases, you end up with a loss from house property, which you can then report in your tax return and use accordingly.

How to Report Loss in ITR/Form/Disclosure

When you have a loss from house property, here’s how you treat it in your tax filing:

• Select the correct ITR form (Form 1 or 2 for individuals), depending on your income sources. Report the loss under the head “Income from House Property.”
  
• Enter the details such as GAV, municipal taxes, standard deduction, and interest on home loan to calculate the loss.
  
• You can set off up to INR 2 lakhs of this loss against other income sources in the same financial year.
  
• Any remaining loss can be carried forward for up to eight assessment years and used only against future income from house property.
  
• Be mindful of the tax regime (old or new), as deduction and set-off rules differ.
  
• Keep documents such as loan interest certificates, property tax receipts, and rent receipts for verification.

Why Understanding Loss from House Property Is Important for Tax Planning

Grasping the loss from house property meaning, and how it works gives you a strategic edge. It helps you optimise your tax liability by reducing current or future taxable income, plan property usage by deciding which property to mark as self-occupied or let-out, and structure your loan and construction timing to avoid losing interest deductions. By staying updated on the losses from house property Section 24 and tax regime changes, you can claim eligible benefits effectively while ensuring overall financial clarity on how property-related losses impact your tax position.

Conclusion

You now know how to identify, calculate, and claim a loss from house property under Section 24, and how to report it correctly in your Income Tax Return (ITR). Ensure you gather all relevant documents and follow the computation steps carefully. If in doubt, consult a qualified tax advisor to verify your eligibility and compliance with the latest tax provisions.
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