Short Answer: No, the Annual Value (AV) or Net Annual Value (NAV) of a property cannot be negative under the Income Tax Act. However, the final taxable income from house property can be negative (i.e., a loss) due to deductions like interest on home loans.
Detailed Explanation
- Annual Value (AV) & Net Annual Value (NAV) Cannot Be Negative
-
- Annual Value (AV)is the higher of:
- Actual rent received (if let out)
- Expected rent (Municipal Value / Fair Rent / Standard Rent)
- Net Annual Value (NAV) = AV – Municipal Taxes
- Since rental income cannot be negative, AV and NAV will always be zero or positive.
- Annual Value (AV)is the higher of:
- When Can Income from House Property Be Negative?
Even though NAV cannot be negative, the final taxable income under “Income from House Property” can be negative due to:
- Standard Deduction (30% of NAV)
- Interest on Home Loan (Section 24(b))
- Let-out Property:No limit → Can create a loss.
- Self-occupied Property:Max ₹2 lakh deduction → Can result in a loss.
Example:
- Gross Annual Value (GAV)= ₹1,00,000
- Municipal Taxes= ₹10,000
- Net Annual Value (NAV)= ₹90,000
- Deductions:
- Standard Deduction (30% of ₹90,000) = ₹27,000
- Interest on Loan = ₹1,50,000
- Taxable Income = ₹90,000 – ₹27,000 – ₹1,50,000 = (₹87,000) [Loss]
