Budget 2017: Calculate Revised Return from Your Rental Income

Published: February 2, 2017 at 9:46 am

Last Updated on

The rent received from a house property is treated as income and taxed as per slab. However, certain deductions are eligible for this taxable amount. Budget 2017  had restricted the amount of deduction one can claim. Here is an illustration and a revised real estate returns calculator.

The taxable income is given by:  rent – (loss from house property)

Loss from house property (old rule)

loss from house property = Rental income – (corporation+water/sewage tax) – (standard deduction) – (interest component of home loan)

This entire amount can be set off from salary income.

Standard deduction = 30% of  (rent – taxes)

Loss from house property (new rule)

The loss from house property (calculated as above) has a ceiling of Rs. Two Lakhs.

“However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent years in accordance with the existing provisions of the Act”.

This implies the maximum tax one can save = 2,00,000 x tax slab (+cess).

Earlier there was no limit on the tax that one can save.

I have now modified the real estate returns calculator to account for this new rule.

Suppose you have purchased a property on a loan and let out on rent, it will take into account, tax benefits,  expenses and rental income to give the annualised return year after year. So it can be used to calculate when one will break-even.  It can also be used if the property is fully paid for.

You can Download the Feb 2017 Real Estate Returns Calculator and read more about how it works here.

Related post: Five reasons why I will never invest in real estate

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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6 Comments

  1. For properties purchased in the past, does the calculator cater for set off of unlimited loss till 31/03/17 and loss limited to 2 lakh wef 01/04/17?

  2. This is not related to post.
    I received an email from no_reply(at)cibil.com

    It was in junk email folder. But when I checked the actual link it refers to www(dot)cibil(dot)com/mailer/fcsr/freecibilscorereport/, it seems legitimate.

    Has anyone availed free cibil report ? @Pattu, can you write any post on it ? If one should avail it or not any pros and cons ?

    Thanks,

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