Income from House Property – Income Tax Act (FY 2024-25)

Income from House Property is one of the five heads of income chargeable to tax under the Indian Income Tax Act, 1961. This head covers rental income earned from any residential, commercial, or other building or land appurtenant thereto. Even if the property is not actually on rent, certain deemed income rules may apply.

Relevant sections: Section 22 to Section 27 of the Income Tax Act.

Section 22 – Basis of Charge

According to Section 22:

The annual value of any building or land appurtenant thereto of which the assessee is the owner, shall be chargeable to income tax under the head “Income from House Property”, except such portions as occupied by the taxpayer for business or profession.

Types of House Property for Tax Purposes

1. Self-Occupied Property (SOP)

• Used for own residence.
• Annual Value = Nil (upto two properties allowed as self-occupied as of FY 2020 onwards).

2. Let-Out Property (LOP)

• Actually rented out to tenant.
• Rental income taxable as ‘Annual Value’.

3. Deemed Let-Out Property

• If a taxpayer owns more than two houses and not all are rented, the third and subsequent properties are treated as deemed let out.

Annual Value Calculation – Section 23

For let-out or deemed let-out, we calculate Annual Value based on following factors:

After getting Net Annual Value, deductions under Section 24 are applied.

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Deductions – Section 24

Two deductions allowed:

1.Standard Deduction – Section 24(a):

• 30% of Net Annual Value
• Allowed even if actual expenses are different

2. Interest on Housing Loan – Section 24(b):

• Self-Occupied: Maximum ₹2,00,000 per year
• Let-Out: Full interest allowed (no limit)
• Pre-construction interest: Deductible in 5 equal installments

Additional Deduction – Sec 80EE & 80EEA (for first-time home buyers)

• Section 80EE: Additional ₹50,000 for home loan interest (conditions apply)
• Section 80EEA: ₹1,50,000 extra for affordable housing (valid for loans sanctioned till FY 2022-23 – check applicability)

Unrealised Rent & Arrears – Section 25A

• Unrealised rent: Reduced from actual rent if conditions are satisfied
• Arrears of rent received later are taxable in year of receipt under Section 25A(1), after 30% standard deduction

Example Calculation – Let Out Property

Example: One property rented for ₹25,000/month. Municipal tax paid ₹20,000. Interest on home loan ₹2,80,000.

• Gross Annual Value (GAV) = ₹25,000 × 12 = ₹3,00,000
• Less: Municipal Taxes = ₹20,000
• Net Annual Value (NAV) = ₹2,80,000
• Less: Standard Deduction @30% of NAV = ₹84,000
• Less: Interest on Housing Loan = ₹2,80,000 (Full allowed as let-out)

Income from House Property = NAV – SD – Interest
= ₹2,80,000 – ₹84,000 – ₹2,80,000 = (–₹84,000) (Loss)

→ Loss can be set off from other heads up to ₹2,00,000 in same FY.

Self-Occupied Property Example (SOP)

• Annual Value = Nil
• Standard deduction = Not applicable
• Housing interest deduction u/s 24(b): up to ₹2,00,000 maximum
• Loss limited to ₹2,00,000 under set-off rules

Special Cases

1.Co-ownership of Property

• Income divided among co-owners ( proportionate)
• Each claims deduction separately

2.Partially Let Out & Partially Self-Occupied

• Property separated into parts – compute separately

3. Vacancy period adjustment

• If property was vacant for some months, expected rent used for GAV

FY 2024-25 Important Highlights

• No change in core provisions for house property under Finance Act 2024
• Loss from house property can be set off up to ₹2 lakh in the same year
• Any remaining loss can be carried forward for 8 A.Y.

 Frequently Asked Questions (FAQ)

Q1. How many self-occupied properties are exempt?

Two properties can be treated as self-occupied with Annual Value = Nil.

Q2. Can I claim 30% standard deduction on self-occupied property?

No, standard deduction is only on Net Annual Value of let-out properties.

Q3. Interest limit for home loan?

• Self-occupied: ₹2,00,000 (Section 24b)
• Let-out property: No limit

Q4. Is Municipal tax deductible if not paid?

No. Only taxes actually paid during the year are allowed.

Conclusion

Income from House Property is unique because tax is charged even if actual rent is not received (in deemed let-out cases). Understanding the Annual Value, GAV, NAV and allowed deductions helps in proper tax planning. If you have taken a home loan and the property is self-occupied, you can claim up to ₹2 lakh interest deduction annually. For rented properties, unlimited interest is allowed but the final income may become a loss due to deduction rules.

Key takeaway:

Always compute GAV correctly, claim allowable deductions (30% + interest), and declare your rental income in ITR for compliance.

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