New Income Tax Bill Clarifies House Property Deductions
The revised Income Tax (No. 2) Bill, 2025, has introduced much-needed clarity for homeowners by aligning with current tax practices. The updates address two key areas under Clause 22, providing certainty for taxpayers.
1. Standard Deduction on Annual Value
The Bill now specifies that a 30% standard deduction can be claimed on the annual value of a residential property. Crucially, this deduction is calculated after municipal taxes have been subtracted. This resolves an ambiguity in the initial draft, which failed to specify whether the deduction applied before or after municipal taxes.
2. Deduction for Pre-Construction Interest
A significant clarification concerns interest paid on home loans during the pre-construction period. The revised provision allows this interest to be claimed in five equal annual installments, beginning from the year construction is completed.
This benefit has been extended to both self-occupied and let-out properties, correcting an earlier draft that restricted the deduction only to self-occupied homes. This ensures that all homeowners, regardless of how they use their property, receive equal treatment under the law.
These clarifications ensure the new Bill is consistent with the long-standing norms of the Income-tax Act, 1961, preventing potential disputes and offering relief to homeowners with home loans.