When it comes to reporting losses from house property in your Income Tax Return (ITR) for AY 2026-27, many taxpayers encounter pitfalls that can lead to notices from the tax department. Let's dive into the practicalities.

Understanding the Basics

Loss from house property can be set off against other income, but there are specific rules to follow. For many taxpayers, the challenge lies in accurately reporting these losses while ensuring compliance with all relevant tax provisions.

Common Scenarios and Mistakes

• Multiple Properties: If you own multiple properties, it’s crucial to ensure that you are reporting the correct loss. For instance, a taxpayer mistakenly reported losses from multiple let-out properties without clearly differentiating them in their ITR. This led to discrepancies in their Form 26AS, resulting in a notice from the tax department.
• Mismatch in AIS/26AS: Often, the Annual Information Statement (AIS) can show discrepancies if your reported income or loss does not match with the bank interest or rental income reported. A seasoned taxpayer once faced a notice simply because they forgot to include a rental income from a property that was leased out for a part of the year.
• Incorrect Form Selection: Filing ITR-1 when you have house property losses may not be ideal. A taxpayer mistakenly filed ITR-1 thinking they could report losses, only to find out that they should have filed ITR-2 instead. This led to a defective return notice.

Capital Gains Confusion

If you’ve realized capital gains on the sale of a property, ensure that these are reported separately. The confusion often arises when taxpayers try to offset capital gains against house property losses. Remember, losses from one house property cannot be set off against gains from another, especially if the other is classified under capital gains.

How to Report Loss from House Property

1. Determine the nature of your property (self-occupied or let-out).
2. Calculate the loss accurately by deducting municipal taxes and interest on borrowed capital from the rental income.
3. Choose the correct ITR form based on your income profile. ITR-2 is typically suitable for reporting house property losses.
4. Provide detailed disclosures, especially if there are multiple properties or mixed income sources.
5. Double-check for any mismatches with AIS/Form 26AS before submission.

Real-Life Filing Example

Consider a taxpayer, Rajesh, who owns two properties—one self-occupied and one rented out. He claimed a loss against his salary income without detailing the rental income, leading to a mismatch with his Form 26AS. The tax department issued a notice seeking clarification, which could have been avoided had he provided detailed disclosures.

Conclusion

Reporting losses from house property might seem straightforward, but a misstep can lead to significant complications. If you’re unsure or have a complex income profile, it may be worth consulting a tax professional to navigate your filing for AY 2026-27.

For tailored advice, consider our consultation services.