Tax deduction on rental income
This query is : Resolved
21 February 2012
Hi,
I am receiving 14 lakhs annual rent from my commercial property. I have checked some websites and have understood this so far,
Taxable Rent = (Annual Rent) - (Municipal/Property Tax + 30% of Total rent towards repairs & maintenance + interest paid towards loan up to 30K)
My questions,
1) 30% of total rent towards repairs - Do I need to show bills or is it a flat deduction?
2) I have borrowed a 'Loan against Property' (Not a home loan), so will the interest paid towards this loan be deductible?
3) Is service tax payable on total annual rent or Total rent after these deductions?
Can you please help.
I am receiving 14 lakhs annual rent from my commercial property. I have checked some websites and have understood this so far,
Taxable Rent = (Annual Rent) - (Municipal/Property Tax + 30% of Total rent towards repairs & maintenance + interest paid towards loan up to 30K)
My questions,
1) 30% of total rent towards repairs - Do I need to show bills or is it a flat deduction?
2) I have borrowed a 'Loan against Property' (Not a home loan), so will the interest paid towards this loan be deductible?
3) Is service tax payable on total annual rent or Total rent after these deductions?
Can you please help.
21 February 2012
1. 30% Standard deduction for repair of house property, no need to submit any bills for claiming
2. Only interest on loan taken for construction, repair only allowable deduction u/s.24b
3. Service tax need to pay on total rent. before making any deduction.(Income tax & service ta both are different taxes)
2. Only interest on loan taken for construction, repair only allowable deduction u/s.24b
3. Service tax need to pay on total rent. before making any deduction.(Income tax & service ta both are different taxes)
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22 February 2012
Thanks a lot Ramesh.
Just one clarification on point-2, i borrowed this loan against property (LAP) for contructing this building, however since it is a LAP it could have been used for anything else too like marriage. There is no document to support that I borrowed this loan for contruction. So, will the interest still be eligible for deduction?
Just one clarification on point-2, i borrowed this loan against property (LAP) for contructing this building, however since it is a LAP it could have been used for anything else too like marriage. There is no document to support that I borrowed this loan for contruction. So, will the interest still be eligible for deduction?
26 July 2025
Great question!
For **interest on loan against property (LAP)** to be **allowed as a deduction under Section 24(b)** for house property income, the key point is:
* The loan must have been **taken specifically for acquisition, construction, repair, renewal or reconstruction** of the property.
* **You need to prove the loan was utilized for the property**, otherwise, the interest deduction may be disallowed by the Income Tax Department.
Since you **don't have documents proving the loan was used for construction**, the interest paid on the LAP may **not be allowed as a deduction** under Section 24(b). The department is strict about the purpose of the loan.
---
### Summary:
* 30% standard deduction: No bills needed, flat deduction.
* Interest on LAP: Allowed **only if loan used for property-related work and proof available**.
* Service Tax: Charged on gross rent (before deductions).
If you want to claim the interest deduction, try to get any bank statements, loan sanction letter, or other evidence that link the loan to the property construction.
---
For **interest on loan against property (LAP)** to be **allowed as a deduction under Section 24(b)** for house property income, the key point is:
* The loan must have been **taken specifically for acquisition, construction, repair, renewal or reconstruction** of the property.
* **You need to prove the loan was utilized for the property**, otherwise, the interest deduction may be disallowed by the Income Tax Department.
Since you **don't have documents proving the loan was used for construction**, the interest paid on the LAP may **not be allowed as a deduction** under Section 24(b). The department is strict about the purpose of the loan.
---
### Summary:
* 30% standard deduction: No bills needed, flat deduction.
* Interest on LAP: Allowed **only if loan used for property-related work and proof available**.
* Service Tax: Charged on gross rent (before deductions).
If you want to claim the interest deduction, try to get any bank statements, loan sanction letter, or other evidence that link the loan to the property construction.
---
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