Introduction: InHouse vs InHouse – New Tax Regime For House Properties
The introduction of the new tax regime for house properties has brought about significant changes in the way deductions and benefits are handled. This new regime aims to simplify the tax structure and provide clarity to taxpayers.
However, it also means that some of the deductions available in the old regime are no longer allowed. This article explores the differences between the in-house and in-house tax regimes and discusses how these changes affect taxpayers.
Old Tax Regime Option For Taxpayers
One important aspect of the new tax regime is that taxpayers have the choice to opt for the old regime if they prefer. This allows individuals to continue with the familiar deductions and benefits they were previously eligible for.
By opting for the old regime, taxpayers can still claim deductions for interest on home loans, municipal taxes, and a standard deduction of 30%.
Elimination Of Deductions Under The New Tax Regime
Under the new tax regime, many deductions that were available in the old regime are no longer allowed. These include deductions for expenses such as interest on home loans and municipal taxes.
This means that taxpayers will no longer be able to reduce their taxable income by claiming these deductions. As a result, their overall tax liability may increase.
Deductions Allowed For Houses With Rental Income
For houses with rental income, some deductions are still permitted under the new tax regime. Taxpayers can claim deductions for interest on home loans, municipal taxes, and a standard deduction of 30% for maintenance expenses.
These deductions help to reduce the taxable income generated from rental properties.
Set-Off Of Losses From Multiple House Properties
Another advantage of the new tax regime is that losses from one house property can be set off against the income from other properties. This allows taxpayers with multiple house properties on rent to balance out any losses they may incur.
By utilizing this provision, individuals can minimize the overall impact of losses on their taxable income.
Non-Carry Forward Of Losses Under The New Tax Regime
Under the new tax regime, losses from house properties cannot be carried forward to subsequent years. This means that if an individual incurs a loss from a house property in a particular year, they cannot offset this loss against their income in future years.
This change may have a significant impact on taxpayers who rely on carry-forward losses to reduce their tax liability.
Calculation Of Net Annual Value (NAV) For Tax Purposes
When calculating the tax liability for house properties, the gross annual value (GAV) of the property should be determined. This value is then reduced by deducting municipal taxes to arrive at the net annual value (NAV).
It is this NAV that forms the basis for calculating the taxable income from the property.
Standard Deduction And Home Loan Interest Deduction For Maintenance Expenses
In the new tax regime, a standard deduction of 30% is allowed for maintenance expenses. This deduction is aimed at offsetting the costs incurred in maintaining the house property.
Additionally, taxpayers can also deduct the interest paid on a home loan from the NAV after the standard deduction. This further helps to reduce the taxable income from house properties.
In conclusion, the new tax regime for house properties brings about changes in the deductions and benefits available to taxpayers. While the old regime allows for familiar deductions, the new regime eliminates certain deductions but still provides relief for houses with rental income.
Taxpayers with multiple house properties can also set off losses from one property against income from others, although losses cannot be carried forward. It is important for individuals to carefully consider these changes and make an informed decision when choosing between the in-house and in-house tax regimes.