Restriction on set-off of loss from House property

Section 71 of the Act relates to set-off of loss from one head against income from another. In line with the international best practices it is proposed to insert sub-section (3A) in the said section to provide that set-off of loss under the head Income from house property” against any other head of income shall be restricted to two lakh rupees for any assessment year. 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 amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.

[Clause 31]

Extract of relevant clause from Finance Bill, 2017

Amendment of section 71.

31. In section 71 of the Income-tax Act, after sub-section (3), the following sub-section shall be inserted with effect from the 1st day of April, 2018, namely:—

‘(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.’.

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  1. Jayaraj says:

    I have the same question as Praveen Kumar. It is mentioned that there is NO LIMIT on Interest paid on letout property. My total interest on letout property is Rs.4.75 lakhs. Can this be deducted against my taxable income in current year ?

    My company says it can be carry forward for next 4 assessment years only.

  2. C A D P Mule says:

    There is limit of Rs 2 lacs on account of interest for self occupied property. As far as let out property (including deemed let out) is concern there is no such limit. The change proposed in the budget is on set off of losses from house property (which is 2 lacs) For e g Rent form property is 15 lacs and interest is Rs 10 lacs, income from House property will be 5 lacs

  3. Praveen Kumar says:

    Does it mean that if a salaried assessee is owning two house- one self occupied and one let out and both are financed from borrowed funds, the total adjustment for interest will be restricted to two lacs only??

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June 2021