Tax Filing

Salary and Housing Deductions

File ITR for salary income and claiming housing deductions

An individual or HUF having salary income and more than one house property should file ITR-2. The form ITR-2 is applicable for your tax filing if you satisfy the below conditions:

1. 1. You are an individual or HUF (applies to resident, not ordinarily resident and non-resident);
   2. Income from salaries, house property, capital gains and other sources except income from business or profession.
   3. Clubbing of income of minor child or spouse with the taxpayer’s income.

Note: ITR-2 enables carry forward and set off of losses. Also, if you are director in any company or hold unlisted equity, you need to file ITR-2.

In case you have income from only one house property, you can file ITR-1. In case you have income from business or profession, you can file ITR-3.

Reporting income from salaries under ITR-2:

A taxpayer should provide break-up of components of salary such as allowances, exemptions, value of perquisites and deductions. Form 16 generally provides the break-up and the various components of salary. However, in certain other cases, the employee should obtain the break-up from their annual tax computation.

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Reporting income from house property under ITR-2:

Individual taxpayer can report income from multiple house properties (whether sole owner or joint ownership) and claim deductions from such property in ITR-2. You can claim the following deductions against income from house property:

1. 1. Municipal tax paid during the financial year
   2. Standard deduction of 30% of the net rental income
   3. Interest on housing loan for construction, repairs or reconstruction purposes

You can set off loss from one house property against income from another house property.

Loss up to Rs 2 lakh arising from deduction on account of interest on housing loan is eligible for set off against income from salaries. Any loss from house property in excess of Rs 2 lakh is eligible for carry forward for up to 8 assessment years. A taxpayer having loss from house property can file ITR-2 to carry forward and/or set off.

Disclose details of tenants in ITR-2:

You need to disclose details of tenants as below:

1. 1. Name of the tenant
   2. PAN or Aadhaar number of tenant (mandatory where tenant does TDS under section 194-IB)
   3. TAN of tenant if tenant does TDS under section 194-I

Details of self-occupied properties:

You need to disclose house properties self-occupied by you during the financial year. You can report up to two houses as self-occupied in the ITR. However, up to AY 2019-20, only one house property was allowed under self-occupied.

In case of house property partly let out and partly self-occupied during the financial year, you should report the property as a let-out property. The actual rent received during the year becomes the income from such property.

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Reporting income from capital gains in ITR-2:

An individual taxpayer not having income from business or profession should file ITR-2 for reporting income from capital gains (Refer to our page on tax filing of capital gains).

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Individual taxpayer who earns the following incomes can report those in ITR-1:

1. 1. Interest on savings bank accounts and fixed deposits
   2. Interest on post office accounts, term deposits and SCSS
   3. Dividend income from mutual funds, equity shares etc.
   4. Interest on bonds and debentures
   5. Any other income not falling under specific heads under income-tax

Option for new tax regime

An individual or HUF filing ITR can opt for the new tax regime under section 115BAC. The taxpayer needs to choose the new tax regime by filing Form 10IE before the filing of their ITR form.

The new tax regime under section 115BAC consists of different slab rates and without any tax deductions for tax saving investments/expenses.

Slab rates under section 115BAC vs normal slab rates:

The new tax regime allows deduction or exemption only for:

1. 1. Conveyance allowance provided to an employee to meet the any expenditure on conveyance as part of the employment.
   2. Compensation received to meet the cost of travelling on tour or on transfer.
   3. Daily allowance received for the purpose of meeting daily charges or expenditure incurred on account of absence from their place of duty.
   4. Employer’s contribution to employee’s NPS account.
   5. Transport allowance granted to a specially disabled person.
   6. Employer claiming deduction under section 80JJA towards additional employee cost.

A salaried individual can choose new tax regime or normal tax regime at the beginning of the financial year. They should make suitable declaration to their employer, and the TDS deduction will be as per their declaration. An employee cannot change their choice at any time during the financial year. However, an employee can change their choice at the time of filing their income tax return. Accordingly, an employee can choose between new tax regime and normal tax regime, whichever is beneficial, at the time filing their return. An employee should indicate their choice in the ITR.

A salaried individual can exercise their option each year. However, an individual having income from business or profession cannot opt again for new regime once they opt out in a particular year.

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An individual should mandatorily file an ITR if they meet any of the below criteria during the financial year:

1. 1. made cash deposits above Rs 1 crore with a bank
   2. incurred expenditure above Rs 2 lakh on foreign travel
   3. incurred expenditure above Rs 1 lakh on electricity

While filing the ITR, an individual should indicate the amount of the deposit made or expenditure incurred during the financial year.

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