Loss in respect of house property whether let-out or self-occupied can be set-off under section 71(1) & 71(2) against any other head of income in the same assessment year.
Loss arising on account of any deduction admissible under section 24 such as interest on borrowings for the purpose of acquiring the property will not be ignored and is eligible for the set-off in the same assessment year.
Loss under the head “Income from house property” which cannot be wholly set-off, against income from any other heads of income in the same assessment year, will be allowed to be carried forward and set-off against “Income from house property”of immediately succeeding eight assessment years [Section 71B].In cases where the property is self-occupied and not let-out during any part of the previous year the annual value of such self-occupied property will be taken at ‘nil’ and no deduction u/s 24 will be allowed except the deduction in respect of interest payable on funds borrowed for the purpose of acquiring, constructing, repairing, renewing or reconstructing such self-occupied property. However, the maximum permissible deduction in respect of such interest is Rs. 30,000/- [1st proviso to section 24(b)]. It may be noted that, the maximum permissible deduction in respect of such interest is Rs. 1,50,000/- where such a house has been acquired or constructed with capital borrowed on or after 1-4-1999 and such acquisition or construction is completed before period/time specified in (a) & (b) of item (v)(A) on page 115 [2nd and 3rd proviso to section 24(b)].