Restriction on set-off of loss from House property : Section 71(3A)

Understand New rule as per Budget plan 2017 on set off of loss from Home home with Practical Example. The unabsorbed loss shall be allowed to be brought forward for set-off in subsequent years for next 8 years and the very same can be set-off only versus income from house home.

Date from which amendment is applicabl e– W.e.f. 1st April, 2018 and will apply in relation to evaluation year 2018-19 and subsequent years

As per Budget 2017

Constraint on set-off of loss from House residential or commercial property Section 71 of the Act relates to set-off of loss from one head versus income from another. In line with the international best practices it is proposed to insert sub-section (3A) in the said area to offer that set-off of loss under the head “Income from home property” against any other head of earnings shall be restricted to two lakh rupees for any assessment year.

This modification will take effect from 1st April, 2018 and will, appropriately apply in relation to evaluation year 2018-19 and subsequent years.

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Constraint on set-off of loss from House residential or commercial property: Section 71( 3A)

Comprehensive Practical Illustration and Effect of this Modification

Allocation of Principal and Interest is provided in the below table:– this is done based on EMI calculator– ONLY INTEREST ASPECT MATTERS FOR

CONVERSATION– PL NOTE INTEREST COMPUTATION IS NOT RELEVANT– the below table exists for total analysis so that you can understand that just how much interest would be paid over 15 years

Year	Principal	Interest	Total Payment in Each Yr.	Principal Outst.
2017	2,76,737	9,05,327	11,82,064	97,23,262
2018	3,32,151	9,57,377	12,89,528	93,91,112
2019	3,66,930	9,22,597	12,89,527	90,24,181
2024	4,05,352	8,84,175	12,89,527	86,18,829
2024	4,47,798	8,41,728	12,89,526	81,71,030
2024	4,94,689	7,94,837	12,89,526	76,76,341
2023	5,46,488	7,43,037	12,89,525	71,29,852
2024	6,03,713	6,85,812	12,89,525	6,526,138
2025	6,66,930	6,22,594	12,89,524	58,59,208
2026	7,36,767	5,52,760	12,89,527	51,22,441
2027	8,13,917	4,75,611	12,89,528	43,08,525
2028	8,99,143	3,90,382	12,89,525	34,09,382
2029	9,93,296	2,96,230	12,89,526	24,16,086
2030	1,097,307	1,92,221	12,89,528	13,18,780
2031	12,12,211	77,319	12,89,530	1,06,571
2032	1,06,571	888	1,07,459	0

But post change proposed in Finance Budget 2017, there will be change in his tax calculation from FY 2017-18 onwards considering that his tax liability would be increased due to restriction of set-off of loss from house property.

Post modification in Financing Spending plan 2017, following photo will emerge for Calculation of Income/ (Loss) under home property[1][1] Analysis based on hypothetical figures– presuming all tax conditions such as return filing within time and others are fulfilled and there is no subsequent change in law

Following assumptions are made:.

• Municipal taxes are presumed
• Lease is presumed to be INR 40,00 0 p.m. 12 = INR 4,80,00 0 p.a.
• It is presumed to be increasing @ 5% every year.

Also Read:  Ind AS 18, Revenue | Difference Between AS 9 and Ind AS 18

• Analysis of continue and Set-off of loss in income from Home in different years

Note 1: Loss of FY 2024 and partial loss of FY 2024 is set-off

Year	Loss
FY 2024	3,02,213
FY 2024	75,079
Overall loss set-off in FY 2028	377,292

Keep In Mind 2: Balance loss of 2024, Full loss of 2024, 2023 and 2024 is set-off

Year	Loss
FY 2024	165,239
FY 2024	173,006

FY 2023	99,765
FY 2024	20,026
Total loss set-off in FY 2029	4,58,036

Conclusion– Based on specific truths, it is possible that in some cases loss from house property might be ended without set-off in subsequent years.

This change might have lengthen and deep impact particularly on take home income of employed class individual considering that income more than 50% would draw in surcharge @ 10% and at the same time, loss of house property is restricted to INR 2,00,00 0

The effect talked about in above analysis will change with change in interest rate.

You might Download Finance Expense 2017 From Below link …

Financing Expense 2017, Direct tax Changes in Budget plan 2017– Download

Other Spending Plan 2017 Updates

• Cash Costs Limit Reduced from Rs 20000 to Rs 10000 u/s 40 A( 3 )
• Base year Altered for calculation of capital gains from 1981 to 2001
• Modified Charge for Delayed Filing of Income Tax Return– Budget Plan 2017
• Disallowance of depreciation u/s 32 & capital investment u/s 35 ADVERTISEMENT on money payment
• TDS Rates U/s 194 J Decreased from 10% to 2% by Financing Bill 2017
• Deemed profit u/s 44 AD reduced from 8% to 6% for digital transaction
• Earnings Tax Due Dates
• How to submit Response for Outstanding Tax Demand
• Extra Devaluation– Who can Avail?, availability, Rate of Include Dep
• Tax Audit Limitation U/s 44 AB Increased From 1 Crore to 2 Crore AY 2017-18
• Threshold limit Increased for upkeep of books of accounts
• Penalty on CA & professionals for furnishing incorrect information in statutory report

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