Reporting income or loss from house property can often be tricky when dealing with taxes. Many property owners make errors that lead to rejected claims or penalties. Understanding the process and knowing how to avoid common mistakes is crucial. Here are common pitfalls when reporting loss on house property and offers guidance on how to avoid them.

Incorrect calculation of income or loss

One of property owners' most common mistakes is incorrectly calculating income or loss from house property. The Indian Tax Act allows a deduction on Home Loan interest, which results in a net loss if the interest paid exceeds the rental income or is more than the property’s notional rent (for self-occupied properties). However, people often make the mistake of not including all relevant deductions or miscalculating them.

How to avoid it

Ensure that all deductions are accurately calculated. The rent received should be correctly added to your gross annual value for a rented property. For a self-occupied property, you are eligible for a reduction on interest paid up to Rs. 2 lakh.

Failing to claim deductions properly

Loss from house property is the most missed deduction, or incorrect claims are filed under such heads. While several major deductions are applied, the largest one is interest on a Home Loan under section 24(b).

How to avoid it

Be mindful of where you claim your deductions. The interest paid on a Home Loan is claimed under Section 24(b) and not under other sections like 80C, which is reserved for principal repayment.

Misreporting multiple properties

If you own more than one property, the treatment for tax purposes changes. You can treat only one property as self-occupied while the others are deemed as rented out, regardless of whether they are rented or not. 

How to avoid it

When reporting more than one property, claim only one as self-occupied and compute notional rent on the others. Claim the proper deduction against each one to avoid additional tax liability or penalties.

Failure to consider the limit for loss offset

Another standard error when reporting losses from house property is that they do not control the set-off limit. Per prevailing tax laws, one can set off losses up to Rs. 2 lakh against incomes such as salary or business income in the same year of account.

How to avoid it

Consider the Rs. 2 lakh limit when setting off a loss from house property.

Conclusion

Reporting a loss on house property can be highly tax-beneficial if done correctly, but one must be careful not to fall into a common trap. By being accurate in the calculation, deducting the right amount, and knowing how multiple properties are dealt with, you can avoid mistakes and make the most of all these available tax provisions.