Property Tax is the tax that is charged by the local government on real estate including land owned by you. The value of property forms the basis of this tax. Many local governments calculate the property or house tax not only on the basis of the size of the property but its location, occupancy status, covered area and quality of construction. The money that is generated through property tax is used by the government in order to maintain the infrastructure and for purposes like repairing of roads, snow removal, building schools etc.
Tax on inherited property In a situation where you become the owner of a second property by way of inheritance, the same rule will apply and you would have to pay tax on the deemed rental income on the inherited property, whether you rent it or not.
1/3rd of rent can be deducted as maintenance
30% of rental income can be claimed as maintenance
Any property taxes paid can be claimed as deduction
Interest paid on property loan can be claimed
Save tax on second property you own
For second property, you may be able to claim full interest paid for the EMI of second house.
As per tax laws, you can claim full deductions for the amount paid as interest on loan for second house whereas for the first house you can claim up to 1.5 lakh Rupees in interest, however for your second house you can claim full amount of interest
EMI refers to Equity Monthly Installment, This includes principal and interest.
service tax on sale of property
If property is sold service tax has to be paid on such property.
This service tax is applicable for property in under construction not in case of fully constructed properties.
Stamp duty on property
At the time of transfer of property and registration with government,stamp duty is required to be paid to property.
Steps to calculate income from house property
Gross Annual Value of the property
The gross annual value of a self-occupied house is zero. It is the rent collected for a house on rent.
Less: Property Tax
Property tax, when paid, is allowed as a deduction.
Net Annual Value
Net Annual Value = Gross Annual Value - Property Tax
Less: 30% standard deduction on NAV
A standard 30% deduction on NAV is allowed as a deduction under Section 24 of the Income Tax Act. No other expenses such as painting and repairs can be claimed as tax relief beyond the 30% cap under this section.
Less: Interest on home loan
Deduction is allowed for Interest on home loan.
Income from house property
The resulting value is your income from house property. This is taxed at the slab rate applicable to you.
Loss from house property
Since the gross annual value of a self-occupied house is zero, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads.
Payment of property tax is not only a legal obligation.The amount of tax you pay to your municipal corporation is used to deliver various civic, social, and infrastructural services. So good roads, better schools and hospitals, and civic cleanliness are all inter-related with your property tax payments.
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