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Tax Savings with House Property Loss for Business Income

About the Case:

Mr. Rathod, a small business owner, faced challenges with the annual losses incurred on his rented residential property. These losses, known as House Property (HP) losses, prompted him to seek guidance from TaxBuddy to understand how to use them strategically for tax savings against his business income.

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Issues faced By

Mr. Rathod

As Mr. Rathod earned business income without a salary, he was uncertain about leveraging HP losses effectively for tax benefits. He approached TaxBuddy with specific questions regarding the utilization and carry-forward of HP losses.

Uncertainty about HP Loss Utilization:

  • Mr. Rathod, with business income and no salary, was unsure about effectively using HP losses for tax benefits.

Queries on Set-off and Carry-forward:

  • Lack of clarity on whether HP losses could be set off against business income.

  • Questions about the option to carry forward HP losses for future years.

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How TaxBuddy Helped

Set-off Against Business Income:

  • TaxBuddy advised Mr. Rathod to set off the HP loss of ₹2,00,000 against his business income, reducing his taxable business income. This led to a lower overall tax liability related to his manufacturing business.

Carry Forward of Losses:

  • Since the HP loss exceeded the income earned from the property, TaxBuddy informed Mr. Rathod about the option to carry forward this loss for up to 8 subsequent financial years. This strategic move could potentially reduce his tax liability in future years.

Let's understand the concept with the help of some figures.

Mr. Rathod operates a small manufacturing business and also owns a residential property that he rents out.  The financial details given below.

  1. Income from Business = 5,50,000

  2. Rent received from house property =   1,20,000

  3. Interest paid on home loan = 3,39,000

  4.  Other Investments = 0

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The Conclusion: 

Mr. Rathod

Tax saving Journey

Through efficient tax planning and utilizing HP losses, TaxBuddy significantly reduced Mr. Rathod's current tax burden related to his manufacturing business. The case study emphasizes the importance of understanding tax laws and leveraging available provisions to optimize tax efficiency.

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