ITR
Deducting property tax for a rented flat
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Facts
Municipal taxes are deductible from annual value in the year they are actually paid by the owner. Paying two years together lets you deduct both in the year of payment. Tax paid by the tenant is not deductible by you.
Provisions and law
- Sec 23, Income-tax Act 1961Annual value rules: up to two self-occupied houses have nil annual value; others are treated as let out at expected rent
- Sec 22 (now Sec 20)Annual value of property you own is taxed under house property
Analysis
If you paid ₹24,000 for two years in FY 2025-26, you reduce annual value by ₹24,000 for that year, which also lowers the 30% deduction base. This applies only to let out or deemed let out houses, since self-occupied houses already have nil value. Keep the receipts with the payment date. Water and sewerage charges levied by the local body as tax also count.
Conclusion
- Collect municipal tax receipts with payment dates.
- Deduct amounts paid by you in the year.
- Apply 30% on the reduced value.
- Report in Schedule HP.
A Savvy can do this for you
Return with rent from two or more properties and home loan interest, Sec 24(b)
₹2,499
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