What if someone told you that you could save lakhs of rupees in taxes on your dream house too without breaking any laws?!! Did you know you could claim a deduction for the municipal taxes you paid on your house property for the year?
Does all that sound too good to be true?
But it IS TRUE! There are often so many kinds of income that are tax-deductible, but we miss out on taking advantage of them. In this blog, we’ll talk about the top 5 mistakes most people make while filing income from house property in their ITR, and a few legal tricks to save lakhs on taxes.
People usually forget to claim certain expenses that they can claim deductions for or declare certain incomes when filing their ITR. Here are the top 5 mistakes people make when filing income from house property:
- When people file their income from house property, they often forget to claim a deduction on the municipal taxes they are paying on the house. These are taxes they pay annually to the municipal corporation in exchange for permission to own that house in the city. If you own a house and have paid municipal taxes on it for a financial year, you can claim a tax deduction on that. But if you try to claim this deduction without actually having paid municipal taxes on your house, it could land you in trouble.
- Secondly, people forget to disclose deemed let-out income. In case you own more than two house properties, you can only claim two of them as self-occupied. Regardless of whether you have actually let them out, the rest will be considered deemed let-out and will have to declare income from it. What you can do is- pick the one with the lowest market rent and declare it as deemed let-out.
- Now, if you forget to disclose rental income that you earn from your house, it could land you in trouble. So many people deliberately hide it thinking the Income Tax Department has no way of finding out. But here’s the thing- when you have tenants, they have to submit your PAN number to their employers to claim rent deduction. This information also ends up in their ITR. So the income tax officer will find out about your rental income eventually. So concealing this income could lead to hefty interest and penalties for you.
- Sometimes, when couples take a home loan jointly, one of them forgets to claim an interest deduction in their spouse’s ITR. If you have both taken a joint home loan for the property and jointly own the house, you are both eligible for tax benefits on the home loan. Each of you can claim a maximum tax deduction of rupees 2 lakh for repayment of this home loan in both of your ITRs. This makes it a maximum deduction of 4 lakh rupees jointly for the household and for the home loan.
- Another common mistake is taking a full deduction of interest paid during the construction period which is available only one-fifth every year starting from the year in which you have received possession of your property. You can start to claim your home loan benefits once the construction of the house property is complete and you have received possession of your house. For the installments you have paid during the construction of your house, you can accumulate and accrue those installments and the entire interest deduction you have paid during the construction period. You will be able to get a tax deduction over a period of five years starting from the year in which you have received possession of your house property.
These were a few common mistakes people make when filing ITR from house property. Keep reading our other blogs so when it comes to income tax, you’re always prepared.