FAQs on Income from House Property

How House Property Is Taxed in India — Practical FAQs & Checklist

Income from house property (rent or deemed rent) is taxed separately under the head ‘Income from House Property’. These FAQs explain how income from house property is computed, what deductions are allowed (municipal taxes, standard deduction, interest on borrowed capital), how losses are set off/carried forward, deemed-owner rules, and practical filing points for homeowners and landlords.

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Frequently Asked Questions-FAQs on Income from House Property

Income from house property is the annual value of the property — either actual rent received (for let-out property) or a deemed annual value (for self-occupied / deemed let-out cases) as defined in the Income-tax Act. Municipal taxes actually paid are deductible while computing the annual value.

Taxable income from house property = Gross Annual Value (GAV) − Municipal taxes actually paid = Net Annual Value (NAV) → Then: NAV − Standard deduction @ 30% of NAV − Interest on borrowed capital (Section 24) = Income chargeable under House Property. The 30% standard deduction is applied after municipal taxes are deducted.

GAV is the higher of: (a) actual rent received/receivable, or (b) reasonable expected rent (i.e., the market value/standard rent), subject to statutory rules and municipal taxes. For self-occupied property, GAV is treated as nil (subject to certain multiple self-occupied situations).

Only municipal/local taxes actually borne and paid by the owner during the year are deductible from GAV (not taxes paid by the tenant even if recovered). Keep receipts to substantiate the deduction.

A flat 30% standard deduction on Net Annual Value is allowed for let-out and deemed let-out properties to cover repairs/maintenance — it is applied after municipal taxes are deducted. This is the standard rule under Section 24(a). Income Tax India+1

Interest on capital borrowed for acquisition/construction/repair is deductible under Section 24(b):

  • Let-out property: Interest is generally allowed as a deduction (subject to legislative changes/limits in particular years).
  • Self-occupied property: Interest deduction is restricted to the statutory cap (₹2,00,000 p.a. under recent rules for the self-occupied house in the old regime). Pre-construction interest can be claimed in 5 equal instalments after completion (see Q9). Official guidance explains the treatment and conditions.

Loss from house property (for example, due to high interest payments) can be set off against income from other heads subject to limits: inter-head set-off rules allow up to ₹2,00,000 of house property loss to be set off against other income in the same year (excess is treated as unabsorbed loss). Unabsorbed loss can be carried forward for up to 8 assessment years and set off only against income from house property in those years. (Check the current Act/notifications for any regime-specific differences.)

Certain transfers or arrangements create a ‘deemed owner’ for tax — e.g., transfer without adequate consideration to spouse/minor child, allotment by co-operative society, long-term possession rights, etc. A deemed owner is treated as owner for taxation of house property. See Section 27 (deemed ownership) and related guidance for specifics.

Interest paid during the pre-construction period is allowed as a deduction in five equal annual instalments starting from the year in which the property is first let out or becomes ready for occupation, subject to conditions. Recent guidance clarifies availability for let-out / self-occupied cases in certain regimes — check the latest CBDT notifications if in doubt.

If a residential property (other than one self-occupied) is not actually let out during the year, it may be treated as deemed let-out (DLOP) and the assessee will be taxable on the notional rent (GAV) subject to municipal taxes and standard deduction. Rules vary for multiple properties and specific cases — check the Act or consult a tax advisor for edge cases.

If multiple persons (e.g., spouses) own a property, income is taxable in the hands of owners in proportion to their ownership share. Co-owners should maintain evidence of shareholding. Special rules apply where the owner is a minor or property is transferred to spouse/minor — deemed-owner rules may override legal title.

Only municipal taxes actually paid by the owner during the year are deductible. If the tenant pays the taxes directly and owner does not, no deduction for owner. Agreements and receipts are necessary to substantiate claims

Most assessees with income from house property use ITR-1/ITR-2/ITR-3 depending on other incomes. (E.g., ITR-1 for individuals with salary + 1 house property + other sources subject to conditions; ITR-2 if capital gains or multiple properties are present.) Use the portal guidance to choose the correct form.

Keep rent agreements, rent receipts, municipal tax receipts, loan sanction letter, interest certificates (Form 16A or bank statement), computation of NAV, and proof of possession/completion for claiming pre-construction interest. If you want to claim set-offs or carry forwards, ensure timely filing and correct schedules.

Large interest (loan taken for purchase/construction) may create a house-property loss. You can set off up to ₹2,00,000 against other income (subject to current rules) and carry forward the balance for set-off against house property income in future years — plan loan structure and tax filings accordingly.

Yes — the Income-tax Bill / Finance Act 2025 process continues to clarify treatment of deductions (including pre-construction interest and standard deduction applications for let-out properties). Keep an eye on official CBDT / Income Tax Department releases for final rules. Recent news and bill updates have proposed/clarified some changes.

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Decode Your Rent & Returns: FAQs on Income from House Property (FY 2024-25)

Closing notes & quick checklist

Income from house property has a straightforward structure (GAV → NAV → apply 30% standard deduction & interest rules) but several practical traps (deemed-owner, proof of municipal taxes, pre-construction interest timings, co-ownership splits). For complex cases — multiple properties, transfers to relatives, lets under rent-to-own or long leases — consult a qualified tax professional or the official Income Tax guidance.

Quick checklist before filing (house property):

  1. Reconcile rent receipts with bank credits and rent agreements.
  2. Keep municipal tax receipts and compute NAV properly.
  3. Calculate and document interest on home loan (pre-construction interest schedule separately).
  4. Use correct share ratios for co-owned properties.
  5. File return timely to preserve set-off/carry-forward rights.

Related Resources

How Income from House Property Is Taxed in India — Practical FAQs & Checklist

Income from House Property — Top FAQs on GAV/NAV, Standard Deduction & Home-Loan Interest

Sources

Disclaimer: The FAQs are for general informational purposes only and reflect current guidance and proposals up to Finance Act / Bill 2025. They are not professional tax advice. For case-specific guidance, rely on the official Income Tax Department publications or consult a qualified tax professional.