Income Tax Bill 2025: Understanding House Property Losses and Adjustments

The Income Tax Bill 2025 introduces significant clarifications regarding the treatment of losses from house properties. These amendments provide clear guidelines on how taxpayers can adjust and carry forward such losses, ensuring a streamlined approach to real estate taxation.

Key Provisions of the Income Tax Bill 2025

1. Adjustment of Losses

• Inter-property Adjustment: If a taxpayer incurs a loss from one house property, it can be adjusted against income from another house property.

2. Limit on Adjustments

• Annual Adjustment Cap: A maximum of ₹2 lakh can be set off against other income in a financial year. Losses exceeding this limit cannot be adjusted in the same year.

3. Carry Forward of Losses

• Unused Losses: Any unadjusted loss after the ₹2 lakh cap can be carried forward for up to eight years.

• Set-off Restriction: Carried forward losses can only be set off against future house property income and not against income from other sources such as salary or business profits.

Real-Life Examples

Let’s consider an example of a taxpayer, Rahul:

• Salary income: ₹10 lakhs

• Loss from house property: ₹4.5 lakhs

Rahul can adjust ₹2 lakh of the house property loss against his salary, reducing his taxable income to ₹8 lakhs (₹10 lakh - ₹2 lakh). The remaining ₹2.5 lakh loss will be carried forward and can be adjusted only against future house property income within the next eight years.

Let’s consider another case where a taxpayer, Neha, has:

• Business income: ₹15 lakhs

• Loss from house property: ₹5 lakhs

Neha can adjust ₹2 lakh of the house property loss against her business income, reducing her taxable income to ₹13 lakhs (₹15 lakh - ₹2 lakh). The remaining ₹3 lakh loss will be carried forward and can only be set off against future house property income within the next eight years.

Implications and Benefits

• This provision ensures better flexibility in managing real estate investments.

• It provides tax relief in future years by allowing losses to be utilized effectively.

• The structured approach simplifies compliance and taxation for individuals with house property income.

With these clarifications, the Income Tax Bill 2025 makes tax planning for real estate investors more transparent and manageable. Whether you're a salaried professional or a business owner, understanding these provisions can help you optimize your tax liability and plan your finances better.

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