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CS Executive · Tax Laws and Practice · Income under the Head House Property

Mr. Harish Iyer borrowed Rs. 20,00,000 for constructing a house and paid Rs. 1,50,000 interest in the tax years before the year of completion. Construction completes in the tax year 2026-27 and he occupies it himself. Current-year interest is Rs. 1,20,000. Under the Income-tax Act, 2025, assuming the conditions for the Rs. 2,00,000 limit are met, what is his income (loss) from house property for 2026-27?

The loss is Rs. 1,50,000. The pre-construction interest of Rs. 1,50,000 is spread over five years, giving Rs. 30,000, which added to current interest of Rs. 1,20,000 totals Rs. 1,50,000. This is below the Rs. 2,00,000 cap, and the annual value is nil.

  1. ALoss of Rs. 1,50,000Correct
  2. BLoss of Rs. 1,20,000
  3. CLoss of Rs. 2,00,000
  4. DLoss of Rs. 30,000

Explanation

Prior period interest is allowed in five equal instalments: Rs. 1,50,000/5 = Rs. 30,000 per year. Current interest Rs. 1,20,000 plus Rs. 30,000 equals Rs. 1,50,000. This is within the Rs. 2,00,000 cap under section 22(2)(a), and annual value of a self-occupied house is nil, so the loss is Rs. 1,50,000. Option 3 ignores the cap not being reached, and option 2 omits the instalment.

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