Self-Occupied Property + Rental Property: How to Report Both for Tax Filing
- Farheen Mukadam
- Sep 12
- 10 min read
When filing your Income Tax Return (ITR), one of the critical sections that taxpayers need to focus on is reporting income from property. This includes self-occupied property, rental property, or properties that may have a mixed use. The way you report these properties affects your tax liability, so it’s essential to understand how to correctly disclose them on your ITR forms. Self-occupied and rental properties are subject to different tax rules, and mistakes in reporting can lead to errors in your assessment, resulting in delayed refunds or penalties. Let us explore the process of reporting both self-occupied and rental properties, as well as the latest amendments for FY 2024-25 that may affect property reporting.
Table of Contents
How to Report Self-Occupied Property
Self-occupied property is any residential property in which you live or use for your own purposes. Under Section 23 of the Income Tax Act, income from self-occupied property is considered to be zero, meaning you don't pay taxes on any income from the property. However, it is still required to be reported in your ITR. When you file your return, you'll need to fill in details such as the address of the property, the value of the property, and the municipal taxes paid. If you have any home loan on this property, you can also claim a deduction on the interest paid under Section 24(b)of the Income Tax Act, up to ₹2 lakh.
To report a self-occupied property, you would typically enter the details in the 'Income from House Property' section of your ITR form. Make sure to provide all the necessary details, including the interest on home loans, as this can lead to substantial tax savings.
How to Report Rental Property
If you own property that you rent out, you must report rental income as part of your taxable income. Under the Income Tax Act, rental income is subject to tax under the head "Income from House Property." The income earned from renting out a property is taxable, and you can claim deductions under Section 24(b) for the interest on a home loan taken to acquire the property.
When reporting rental property, you'll need to enter the following details in your ITR:
Gross Rental Income: The total amount of rent you receive from the tenant(s) in the year.
Municipal Taxes Paid: The property taxes paid to the local government, which can be deducted from your rental income.
Deductions under Section 24: You can claim a standard deduction of 30% of the rental income for repairs and maintenance, along with the interest paid on a home loan.
The net income (rental income minus deductions) will be added to your total taxable income. Ensure that the property’s address and income details are correctly entered to avoid errors.
What Happens if a Property is Both Self-Occupied and Rented
In some cases, a property may be used both as a self-occupied residence and rented out. This typically occurs when part of the property is rented while you live in the rest. In such cases, you must declare the rental income for the portion of the property that is rented out, and report the rest of the property as self-occupied.
For example, if you have a two-bedroom apartment where one room is rented out and you live in the other, the income earned from renting out the room must be reported as rental income, while the rest of the property can be treated as self-occupied, with no income to report. You will need to allocate the property’s total value and expenses proportionately between the rented and self-occupied parts.
Latest Amendments for Self-Occupied Property (FY25)
For the Financial Year 2024-25 (Assessment Year 2025-26), there are some important changes in the tax treatment of self-occupied properties. One key amendment is related to the treatment of properties under the new tax regime. Taxpayers opting for the new tax regime may not be able to claim deductions for home loan interest under Section 24(b). However, self-occupied property remains exempt from rental income taxation under both the old and new tax regimes.
Furthermore, the deduction limit for interest paid on a home loan remains unchanged at ₹2 lakh for self-occupied properties under the old tax regime, but those opting for the new tax regime will lose this benefit.
Practical Example of Reporting Self-Occupied and Rental Property
Let’s walk through a more detailed example to understand how to report a self-occupied and rental property in your Income Tax Return (ITR). In this example, you own a three-bedroom apartment, with two of the rooms being self-occupied, and the third room rented out.
Self-Occupied Portion:
Understanding Self-Occupied Property: A self-occupied property refers to the portion of the house that you personally reside in. In this case, the two rooms that you live in are considered the self-occupied portion of the apartment. According to the Income Tax Act, you do not need to report any rental income from the self-occupied portion of your property.
Deductions Available for Self-Occupied Property: Even though there is no rental income from the self-occupied portion, you can claim deductions on the home loan interest under Section 24(b) of the Income Tax Act. The maximum deduction you can claim on interest for a self-occupied house property is ₹2,00,000 per year.
For instance, if you are paying ₹1,50,000 annually as interest on your home loan, you can claim the entire amount as a deduction, reducing your taxable income.
Principal Repayment: Additionally, underSection 80C, you can claim a deduction for principal repayment on the home loan, but this is subject to the overall limit of ₹1.5 lakh per financial year.
Rented Portion:
Rental Income: Now, for the third room that you rent out, you need to report the rental income you receive. Let's assume that the rent is ₹10,000 per month. This means the total annual rental income from the rented room is ₹1,20,000 (₹10,000 * 12 months).
Deductions on Rental Income: When reporting rental income, the Income Tax Act allows several deductions to reduce your taxable rental income.
Municipal Taxes: If you are paying municipal taxes on the rented portion of the property, you can deduct these taxes from the rental income. For example, if the municipal taxes on the rented portion amount to ₹5,000 annually, you can subtract this from your rental income, reducing the amount you need to report.
Standard Deduction: In addition to municipal taxes, the Income Tax Act allows a 30% standard deduction on the net annual value of the property. The 30% deduction is applicable to the rental income after deducting municipal taxes and any other applicable expenses related to the rented portion, such as maintenance charges or repairs.
In this example, the rental income is ₹1,20,000, and municipal taxes are ₹5,000, so your net rental income would be ₹1,15,000 (₹1,20,000 - ₹5,000). Applying the 30% standard deduction, you get a deduction of ₹34,500 (30% of ₹1,15,000).
Therefore, the taxable rental income after the standard deduction is ₹80,500 (₹1,15,000 - ₹34,500).
Home Loan Interest Deduction on Rental Portion: If you have taken a home loan for the entire apartment, you can also claim a deduction on the home loan interest for the rented portion of the property. Under Section 24(b), the interest on the home loan is deductible up to ₹2,00,000 for a rented property.
For example, if the total home loan interest is ₹1,50,000, and the rented portion accounts for one-third of the total property, you can claim one-third of the home loan interest as a deduction for the rented room.
The deduction would thus be ₹50,000 (₹1,50,000 * 1/3). This reduces the taxable rental income further.
How Your ITR Will Reflect These Details:
When you file your ITR, the self-occupied portion of the property will not show any rental income. However, the deductions for the home loan interest (under Section 24(b)) and principal repayment (under Section 80C) can still be reported.
For the rented portion:
You will report ₹1,20,000 as rental income.
You will deduct municipal taxes of ₹5,000.
You will apply the 30% standard deduction, resulting in ₹34,500 being subtracted from your net rental income.
You will also report the home loan interest deduction of ₹50,000 for the rented portion.
In the end, your total rental income for tax purposes will be ₹80,500 after considering all the deductions.
Summary of Reporting in ITR:
Self-Occupied Portion: No income is reported, but you can claim home loan interest (up to ₹2,00,000) and principal repayment under Sections 24(b) and 80C, respectively.
Rented Portion: Report ₹1,20,000 as rental income, deduct ₹5,000 for municipal taxes, claim ₹34,500 as the 30% standard deduction, and claim ₹50,000 as home loan interest deduction for the rented portion.
Important Considerations:
If you have taken a loan for the entire property, ensure that you correctly allocate the interest and principal deductions between the self-occupied and rented portions of the property.
Ensure you maintain records of rent receipts, municipal tax payments, and home loan interest certificates for accurate reporting.
This method of reporting ensures that you comply with tax regulations while maximizing deductions, reducing your taxable income, and optimizing your tax savings.
Conclusion
Reporting self-occupied and rental properties accurately in your ITR is crucial to ensure you comply with tax regulations and avoid penalties. While self-occupied properties are typically exempt from tax, rental income must be reported and is taxable, though you can claim deductions for expenses like home loan interest. The latest amendments for FY 2024-25 have clarified some aspects, but it's essential to understand how these changes affect your filing, especially if you have properties that serve both purposes. If you're unsure about how to report your property or need assistance, using a platform likeTaxBuddy mobile app can streamline the process, ensuring accurate reporting and maximizing your tax benefits.
FAQs
Q1: How should I report a property that is partly rented and partly self-occupied?
If your property is partly rented and partly self-occupied, you need to treat each portion separately for tax purposes. The rented portion should have the rental income reported under "Income from House Property." The self-occupied portion will be considered exempt from income, and you will not need to report any income for that part. For expenses like home loan interest, you should allocate them proportionately based on the area of the property that is rented versus self-occupied. This ensures that the tax deductions are accurately claimed, and rental income is properly reported.
Q2: Can I claim home loan interest on a self-occupied property under the new tax regime?
No, under the new tax regime, taxpayers cannot claim any deductions for home loan interest on self-occupied property. This is one of the trade-offs for choosing the simplified tax structure, which offers lower tax rates but disallows deductions for various expenses like home loan interest, HRA, and others that are typically available under the old tax regime.
Q3: What deductions can I claim for rental property?
For rental properties, you can claim several deductions to reduce your taxable rental income. These include a 30% standard deduction on the rental income for repairs and maintenance, municipal taxes paid on the property, and interest on home loans under Section 24. It’s important to note that the total rental income, after applying deductions, will be added to your taxable income and taxed according to your income tax slab.
Q4: How do I report a property that is both rented and self-occupied?
For a property that is both rented and self-occupied, you should report the rental income from the rented portion under the "Income from House Property" section. The self-occupied portion should be reported as exempt from income, but you must still allocate expenses like home loan interest proportionately between the rented and self-occupied portions. This will ensure that you correctly claim deductions for both parts of the property without over-reporting income or expenses.
Q5: What are the latest amendments for self-occupied property for FY 2024-25?
For FY 2024-25, the key amendment is that taxpayers opting for the new tax regime cannot claim deductions for home loan interest on self-occupied property. However, those under the old tax regime can still claim up to ₹2 lakh as a deduction for home loan interest paid on self-occupied property. This change is important to note when deciding which tax regime to choose, as it impacts the deductions you can claim.
Q6: How does reporting self-occupied and rental properties affect my tax liability?
Reporting both self-occupied and rental properties can significantly affect your tax liability. Self-occupied properties are exempt from income tax, but the rental income is taxable. However, you can reduce the taxable rental income by claiming deductions such as municipal taxes, home loan interest, and repairs/maintenance costs. Properly allocating expenses and reporting both income and deductions ensures that your tax liability is accurately calculated, minimizing the potential for tax overpayment.
Q7: Can I claim tax deductions for a property that is both rented and self-occupied?
Yes, you can claim tax deductions for both the rented and self-occupied portions of a property, but the deductions will differ based on the usage. For the rented portion, you can claim deductions for expenses like municipal taxes, repairs, and home loan interest. For the self-occupied portion, you can claim deductions for home loan interest, but only if you are filing under the old tax regime. The key is to proportionately allocate expenses based on the usage of each portion.
Q8: How should I report home loan interest for a property that I partially rent out?
For a property that is partially rented out, you should report home loan interest proportionately. The interest on the home loan should be divided between the rented and self-occupied portions based on the area of the property that is being rented versus used for self-occupation. This ensures that you claim the correct amount of home loan interest as a deduction, without claiming more than you are entitled to.
Q9: Do I need to provide any additional documentation for reporting property income?
Yes, when reporting property income, you need to provide documentation to support your claims. For rental property, you should include proof such as the property address, rent agreements, and proof of taxes paid (like property tax receipts). For self-occupied property, you will need to provide details such as home loan interest statements and proof of municipal taxes paid. Accurate documentation ensures that your deductions are legitimate and your filings are in compliance with tax regulations.
Q10: Can TaxBuddy assist in reporting self-occupied and rental properties?
Yes,TaxBuddy can help you accurately report both self-occupied and rental properties. The platform offers guidance to ensure that you correctly allocate expenses like home loan interest, municipal taxes, and rental income. With TaxBuddy’s expert assistance, you can maximize your deductions, avoid common mistakes, and file your returns in compliance with the latest tax laws. The platform simplifies the entire process, making tax filing for rental and self-occupied properties hassle-free.
Q11: How can I optimize my tax savings for rental property income?
To optimize tax savings for rental property income, ensure that you claim all eligible deductions, including the standard 30% deduction for maintenance costs, home loan interest under Section 24, and municipal taxes. If you own multiple rental properties, each property’s income and expenses must be reported separately, and the corresponding deductions must be claimed for each one. Proper record-keeping and accurate reporting can help reduce your taxable rental income, resulting in lower tax liabilities.
Q12: What should I do if I receive a tax notice for incorrect property income reporting?
If you receive a tax notice for incorrect property income reporting, the first step is to carefully review your tax return and the notice to identify any discrepancies. You can file a revised return to correct any errors or missing information. If necessary, you may also need to provide additional documentation, such as updated rent agreements or home loan statements, to support your claims. Platforms like TaxBuddy can assist you in handling notices and ensuring your return is updated correctly.
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