The FAQs on “Income from House Property” under the Income Tax Act, 2025 explain key principles for taxation, computation, and deductions. As per Section 20, tax is levied on the annual value of property owned by an assessee, including global properties. Annual value is determined as the higher of expected rent or actual rent, with special provisions for vacancy. Up to two self-occupied houses can have nil annual value, while others are treated as deemed let-out. Deductions include municipal taxes, a standard 30% deduction, and interest on borrowed capital subject to limits. Stock-in-trade properties enjoy a temporary nil valuation benefit, and unrealised rent can be excluded under conditions. Case laws emphasize proper documentation, especially for vacancy claims and related-party rent arrangements. Additionally, clubbing provisions apply when property is transferred without consideration. Overall, the framework simplifies computation while ensuring taxability based on ownership, usage, and substantiated claims.
PROVISIONS RELATED TO INCOME FROM HOUSE PROPERTY UNDER INCOME TAX ACT, 2025
FAQs on Income from House Property under Income Tax Act, 2025
(1) Who is liable to pay Income-tax on ‘Income from House Property’ under the New Income Tax Act, 2025?
As per Sec 20, any assessee who owns any building or land appurtenant thereto shall be liable to compute Annual Value of the property and such annual value shall be chargeable to income-tax under the head “Income from house property”.
(2) How to compute Annual Rental Value?
As per Sec 21(1), the annual value of any property shall be deemed to be the higher of the following—
(a) the sum for which it might reasonably be expected to let from year to year; or
(b) the actual rent received or receivable by the owner, if the property or any part of it is let.
Thus, Section 21 introduces a deeming fiction for computing annual value. Even if the property is not actually let out, we are required to determine a notional rental value based on what it can reasonably fetch.
(3) Are there any exemptions available for properties, which are self-occupied or used for business purposes?
Where any building or Part thereof is used for Business or Profession:
As per Sec 20 (2), any portion of the property occupied by the assessee for the purpose of his business or profession, the profits of which are chargeable to income-tax, then such portion of the property can be excluded from the computation of Annual Value.
Any Houses (maximum 2 Houses) used for self-occupation
As per Section 21(6) & (7), the annual value of the property consisting of a house or any part thereof shall be taken as Nil –
(a) if the owner occupies it for his own residence or cannot actually occupy it due to any reason.
(b) This shall apply only in respect of 2 of such houses as specified by the assessee in this behalf.
(c) This shall not apply, if the house or any part thereof is actually let during any time of the tax year, or if the owner derives any other benefit from it.
(4) I have 3 houses in different cities. House M in Mumbai, House D in Delhi and House C in Chennai. All the 3 are occupied by my family members (House M- I am staying, House D – My minor children along with my spouse are living and House C – My parents are living). Can I claim exemptions for all my 3 houses?
No, as per Sec 21(7), the exemption (Annual value – Nil) can be claimed only in respect of 2 houses. The assessee can select which 2 houses, he would like to treat as ‘self-occupied’. Suppose, if you choose House M and D as self-occupied, then you will be liable to determine the Annual value for House C, which will be subjected to Income-tax liability.
(5) I have 3 houses in different cities. House M in Mumbai, House D in Delhi and House C in Chennai. In House M- I am staying with my spouse & children; and in House D – My parents are staying. House C was let out for one month (April-2026) and after that no one is staying. I am searching for good tenant to occupy it but unable to let out. It was kept vacant for 11 months. Can I claim exemptions for all my 3 houses?
No, as per Sec 21(7), the exemption (Annual value – Nil) can be claimed only in respect of 2 houses. Hence, the annual value of house M and house D can be declared as Nil.
In case of House C, the Annual Value of this house shall be computed based only on actual rent received or receivable by the owner in respect of House C. The deeming fiction for computing annual value (the sum for which it might reasonably be expected to let from that house) shall be ignored, since the property was actually let for a month and remained vacant thereafter [Sec 21(2)]. Please also read the Q6 below.
(6) I have a house in Chennai, which was let out for 12 months to my friend with rental income of Rs.25,000/- per month. The rental value for similar kind of property in the same locality is Rs.1 Lakh. How will the Annual value of house be determined? Will there be any deduction / exemption available, if the house is let out only for one month (April – 2026) and after that it was vacant for 11 months?
Scenario – 1: Let out in all 12 months:
Annual Value, higher of the following-
| Particulars | Amount Rs. |
| the sum for which it might reasonably be expected to let (1,00,000 x 12) | 12,00,000 |
| the actual rent received or receivable (25,000 x 12) | 3,00,000 |
| Annual Value is Higher of the above | 12,00,000 |
Even though, the actual rent received was Rs.3 Lakhs, the Annual Value of the property shall be deemed to be Rs.12 Lakhs as per Sec 21(1).
Scenario – 2: Vacant for 11 months:
Annual Value, higher of the following-
| Particulars | Amount Rs. |
| the sum for which it might reasonably be expected to let. (1,00,000 x 12) | 12,00,000 |
| the actual rent received or receivable (25,000 x 1) | 25,000 |
| Annual Value of the House | 25,000 |
As the property was vacant for 11 months of the Tax year and owing to such vacancy, the actual rent received or receivable by the owner is less than the sum for which it might reasonably be expected to let, the annual value of such property shall be deemed to be the amount so received or receivable. [Sec 21(2)]
(7) I am having 3 properties in Mumbai. 2 Properties were declared as ‘Self occupied’ and Annual value of these 2 properties are “Nil”. I was searching for a good tenant for the 3rd property (reasonable rent : Rs.1 Lakh per month) and not able to find it and hence it was vacant during the entire 12 months. How to compute the Annual value of the property for this 3rd house?
For this 3rd property also, the Annual Value should be calculated as “Zero” / “Nil” as per Sec 21 (2).
The technical calculation will be as follows:
| Particulars | Amount Rs. |
| the sum for which it might reasonably be expected to let. (1,00,000 x 12) | 12,00,000 |
| the actual rent received or receivable (25,000 x 1) | 0 |
| Annual Value of the House | 0 |
As the property was vacant for 12 months [whole of the Tax year] and owing to such vacancy, the actual rent received or receivable is less than the sum for which it might reasonably be expected to let, the annual value of such property shall be deemed to be the amount so received or receivable. In this case, the amount received was “zero”. Hence the Annual Value of the property is “Zero”.
[Please also read Q. No 8]
(8) How do I prove that I was not able to identify the good tenant? Should I keep records for that?
In a famous cricketer Sachin R Tendulkar’s case,
Before the ld. Commissioner of Income Tax (Appeals), the assessee argued that he had made efforts forletting out of flat at Sapphire Park. The assessee submitted the copies of letters written to builder requesting him to identify tenants for the flat at Sapphire Park.
The ld. Commissioner of Income Tax (Appeals) observed that these are copies of purported letters written on plain paper. That there are no evidences for dispatch of these letters as well as receipt of these letters by the builder. That the assessee has not submitted any copy of any response from the builder to these letters.
Hence, the ld. Commissioner of Income Tax (Appeals) held that in absence of the supporting evidence of dispatching of the letters, receipt of the letters by the builder and replies from the builder, these are treated as insufficient evidences to support the assessee’s claim. He held that any prudent person desirous of letting out house property will approach various real estate agents available in the market instead of simply writing few letters to the builder. Therefore, the ld. Commissioner of Income Tax(Appeals) held that the Assessing Officer’s action to charge rental income from the flat at Sapphire Park is a reasonable.
Sachin filed an appeal before the ITAT, MUMBAI BENCH ‘G’ and it was held that:
We find that the assessee has claimed that the said flat had remained vacant throughout the year despite assessee’s reasonable effort to let out the same.
That the assessee had requested the builder to identify the tenants. In this regard, the assessee has submitted three letters written to the builder. It may be noted that as emanating from the records and the letter, the same builder had identified the tenant for another flat of the assessee which was let out and whose rent has been offered and accepted for taxation.
In this factual scenario, the authorities below have doubted the veracity of these letters and doubted the credentials of the assessee’s claim. In our considered opinion, this does not display application of mind to the facts of the case. The assessee is a well renowned cricketer. He is furnishing the return of income of Rs.61,23,14,400/-. The let out value of the property in dispute is assessed as onlyRs.1,26,000/- by the ld. Commissioner of Income Tax (Appeals) as rent for the whole year.
When the same builder has helped the assessee to find tenant for another flat, why his letters to the same builder to help him identify one more tenant, can be considered as fake, defies logic. That the assessee should maintain a dispatch register for his letters as expected by the authorities below, is also abnormal expectation. That the assessee should get stamped receipt from the builder for the receipt of his letters, is equally quixotic proposition.
In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law.
The expectation that despite his unarguably busy professional engagements commanding huge amount of money Shri Sachin Tendulkar should have embarked upon and displayed a more robust and exuberant expedition to find a tenant for his vacant flat by approaching other real estate brokers and keeping an infallible record thereof, is beyond normal conception. Hence, we have no hesitation in setting aside the orders of the authorities below and deleting the addition. Hence, we decide the issue in favour of the assessee.
Sachin R. Tendulkar v Deputy Commissioner of Income-tax 23(3) Mumbai 172 ITD 266 (Mumbai) [10-08-2018]
(9) I have 2 Houses in Madurai and 1 House in USA. Can I claim exemptions for all 3 Houses?
No, Section 20 requires that the annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee shall be chargeable to income-tax under the head “Income from house property”. It not only covers the property in India but also covers any property owned by the Assessee globally. [of course, subject to Double Taxation Avoidance Agreement with another Country]. Please also read Q.No.10.
(10) I have 2 Houses in Madurai and 1 House in USA. All the 3 houses are occupied by own family members. I have considered 1 House in Madurai and 1 House in USA as ‘self-occupied’ property and declared their Annual Value as ‘Nil’. My case was selected for scrutiny assessment u/s.143(3) and during the assessment proceeding, I want to change both the houses in Madurai as ‘self-occupied’ properties and change the house property at USA as deemed-let out. Is it possible?
Yes, the Assessee can change the declaration of self-occupied property during the assessment, as there is no prohibition in Income-tax Act for such change.
ITAT MUMBAI BENCH ‘D’ decided the above in the case of Deputy Commissioner of Income-tax, 5(3)(1), Mumbai v. Deepak Shashi Bhusan Roy.
[2018] 96 taxmann.com 648 (Mumbai)[30-07-2018]
(11) I have 2 houses in Rajapalayam, Tamil Nadu and those were declared as ‘self-occupied’ with Annual Value ‘Nil’. I started constructing a new house at Chennai during the Tax year and will complete the construction during Feb-2027. If I am not able to let-out the 3rdhouse during Tax year due to not identifying the tenant within a month, can I claim the Annual value of the 3rd property also as ‘Nil’ since it will be vacant?
Yes, In the case of Raj Landmark (P.) Ltd. v. Income-tax Officer, Ward 3(2), Jaipur, [2018] 97 taxmann.com 214, it was held that-
Assessee company was in a business of purchasing and constructing of properties – Assessee had constructed a commercial space in month of Feb, 2013 – Assessing Officer brought same to tax under head income from house property for month of March, 2013 on ground that said property remained unsold and vacant at end of financial year – Thus, Assessing Officer assessed said unsold property by applying notional annual letting value. The ITAT held that the deeming fiction for computing annual value could not be applied in assessee’s property due to peculiar reason that completion was completed only in month of Feb, 2013 and it was not possible to let out property just after its completion, i.e., only after one month.
(12) I am a property developer and held 10 houses as ‘Stock-in-trade’ (construction completed during the tax year; but not sold as at the end of the Tax year). Whether the deeming fiction for computing annual value is applicable for all these houses?
No, as per Sec 21 (5), where a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, the annual value of such property or part thereof shall be nil for 2 years from the end of the financial year in which the certificate for completion of construction is obtained from the competent authority.
(13) I have let out a property and the Annual value of the property computed as per Section 21 of the IT Act, 2025 is Rs.10 Lakhs. I have paid an amount of Rs.2 Lakhs as municipal tax / corporation tax for the property during the tax year. Can I claim deduction for this tax paid?
Yes, as per Sec 21(3), the annual value of the property shall be reduced by the taxes (including service taxes) levied by a local authority in respect of such property, actually paid during the tax year by the owner, irrespective of when such taxes became payable.
(14) A tenant, occupied my house for 12 months, vacated it without paying the rent for last 4 months. Whether the rent receivable for the 4 months should be included while computing the Annual Value of the property?
The rent which cannot be realised by the owner shall not be included in computing the actual rent received or receivable, subject to the following rules:
Rule 21 of the Income Tax Rules, 2026: The amount of rent not paid by a tenant of the assessee and so proved to be lost and irrecoverable where, —
(a) the tenancy is bona fide;
(b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;
(c) the defaulting tenant is not in occupation of any other property of the assessee; and
(d) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be futile.
(15) What are the other deductions available for computation of Income from House Property?
The following deductions are available under section 22 (1):
(a) 30% of the annual value as determined under section 21.
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital.
(c) where the capital referred to in clause (b) is borrowed during any period prior to the tax year in which the property has been acquired or constructed, the amount of any interest payable for the said prior period in 5 equal instalments for the said tax year and for each of the four immediately succeeding tax years.
(16) I have 2 properties in Theni, Tamil Nadu which are ‘self-occupied’ properties and the Annual value determined is ‘Nil’ as per Section 21. Can I make any deduction under section 22?
As per Section 22(2), for self-occupied properties, the interest on borrowed capital can be claimed, subject to the following conditions:
The aggregate amount of deduction under sub-section (1)(b) shall not exceed—
(a) Rs. 2,00,000, subject to the following conditions —
(i) the property has been acquired or constructed with borrowed capital and such acquisition or construction is completed within five years from the end of tax year in which capital was borrowed;
(ii) the assessee furnishes a certificate from the person to whom interest is payable on such capital; and
(b)Rs. 30,000/- in any other case.
The aggregate of the amounts of deduction under sub-section (2) in respect of properties of the nature referred to in section 21(6) shall not exceed ₹ 200000
The certificate referred above shall specify—
(a) the amount of interest payable on capital borrowed; and
(b) the interest payable on any new loan, where subsequent to the capital borrowed, the assessee has taken any such loan for repayment of whole or any part of such capital.
(17) I have borrowed a loan from my Sister, who is a Citizen of USA for construction of a House property. Can I claim deduction on interest of this loan while computing the Income under House Property?
Yes, it can be claimed, subject to the condition that-
(a) tax has been deducted and paid on such interest under Chapter XIX-B; and
(b) in respect of such interest, there is an agent in India as per section 306.
(18) I have a House property at Hyderabad, with a borrowed capital and I am paying an interest of Rs.5 Lakhs per annum to SBI and I am residing in this house. I have another house at Madurai and let out the same to my Mother for a rent of Rs.15,000 per month. I have borrowed a loan for acquiring this property at Madurai and paying an interest of Rs.10 Lakhs per month to HDFC Bank. The rent from my mother was received as cash. Please compute the interest amount that can be claimed as deduction under section 22.
In this case, both the houses will be treated as ‘self-occupied’ property and total interest eligible for deduction will be restricted to Rs.2 Lakhs.
In Hitesh H Budhbhatti v. Income Tax Officer, Ward-5(1)(3), the ITAT, Ahmedabad Bench held that-
The assessee has claimed that the residential house was actually let out during the year to his mother for which he has received rent of Rs. 30,000/- from mother albeit in cash. On the basis of property being let out, the assessee seeks claim of interest deduction to full extent.
The assessee has also tried to support his case of let out by an affidavit. When seen in the context, it is very difficult to believe the position taken by the assessee. As noticed earlier, the assessee, at first instance, has not declared rental income while filing the return of income duly verified under s.140 of the Act. The omission to disclose the so-called rent income derived from mother in the return of income is not explained. Needless to say, a person filing the return of income requires to verify the contents of the return to be true and any falsification in such verification has serious consequences under Chapter XXII of the Act.
Thus, the income claimed to have been received and not declared in the return cannot be seen in a light-hearted manner. The assessee has conveniently revised the computation to introduce the source of rental income from mother who also happens to be co-owner of the same property. The receipt has been shown to be in cash to shun any possibility of verification. Thus, no trail is available to verify the correctness of the version of the assessee in a reasonable manner. Thus, one has to rely only on the preponderance of probabilities. The version of the assessee is prima facie improbable having regard to the ground realities. The assessee neither satisfies the condition from exclusion from the ambit of Section 23(2) of the Act nor satisfies its case for inclusion under s.23(3) of the Act on facts.
The lower authorities have rightly questioned the veracity of claim of property being actually let out. The affidavit filed was clearly bald and a self-serving document. No cross examination of the deponent of the affidavit has been offered therein. On a query from the bench about the payment of electricity bill by the licensee of the property, no evidence could be furnished to prove actual occupation by mother on rental basis. It is also difficult to comprehend such a claim of the assessee on the touchstone of societal value prevalent and ethos in Indian society.
The case of the assessee towards claim of rent from mother for occupation of his house clearly appears be an eyewash to merely put the property in the bracket of Section 23(3) of the Act with a view to claim deduction of full interest costs without any restriction applicable to self-occupied house.
In the result, appeal of the assessee is dismissed.
In this case, the ITAT clearly established certain principles:
1) There is no restriction under Income Tax Law to let out the property to the Mother of the Assesee; but it is difficult to comprehend such a claim on the touchstone of societal value prevalent and ethos in Indian society.
2) No evidence could be furnished to prove actual occupation by mother on rental basis.
3) No trail is available to verify the correctness of the version of the assessee in a reasonable manner.
(19) What will happen when I receive the rent related to previous Tax years as ‘arrears’ or receive the unrealised rent from my previous tenant in the subsequent tax year?
The amount of arrears of rent received by an assessee from a tenant, or the unrealised rent realised subsequently from a tenant, shall be deemed to be the income from house property in respect of the tax year in which such rent is received or realised, whether the assessee is the owner of the property or not in that tax year.
A sum equal to 30% of the arrears of rent or the unrealised rent referred to in sub-section (1) shall be allowed as deduction.
(20) I have a House property at Rajapalayam which is co-owned by me along with my spouse with equal share (50:50). This co-ownership sharing ratio is clearly mentioned in the ‘Sale Deed’ of the property registered with the Registrar of Assurance [Sub-registrar office]. We have borrowed a housing loan jointly in the same ratio. The house is self-occupied property. We are paying interest amount of Rs.5 Lakhs for the loan. How to compute the Income from house property in this case?
| Particulars | For Husband Amount Rs. | For wife Amount Rs. |
| Annual Value of the self- occupied Property – A | Nil | Nil |
| Interest Paid – B | 2,50,000 | 2,50,000 |
| Maximum interest
allowable U/s.22(2) – C |
2,00,000 | 2,00,000 |
| Loss from House property | (-) 2,00,000 | (-) 2,00,000 |
(21) In the above case, if the house is let out and Annual value of the property is Rs.6,00,000/- (Rent received Rs.50,000 per month, which is also the reasonable rent for the same type of house in that location). How to compute the Income from house property in this case?
| Particulars | For Husband Amount Rs. | For wife Amount Rs. |
| Annual Value of the self- occupied Property – A | 3,00,000 | 3,00,000 |
| Standard deduction 30% of the Annual Value – B | 90,000 | 90,000 |
| Interest Paid – C | 2,50,000 | 2,50,000 |
| Loss from House property A-B-C | (-) 40,000 | (-) 40,000 |
(22) I have purchased a house property in Trichy during the year 2000. I have transferred the same to my wife during the year 2005 as a gift by way of gift deed, which was registered with the Sub-registrar office. All the loan availed for acquiring the property has been fully repaid. The said house property is let out for a rent of Rs.12 Lakhs per annum and the same is being credited in my wife’s Bank account. I am a salaried employee, earning salary Income of Rs.10 Lakhs per annum. We propose to file the Income Tax Return for each person by opting to pay the tax under New Tax Regime u/s. 202, so that there will not be any tax liability for both of us. Will it be accepted by the Income Tax Department?
No, it will not be accepted by Income Tax Department. Since you have transferred the house to your wife, without adequate consideration, you will be treated as ‘owner’ of the house, for the purpose of computation of Income from House property, even though, you have transferred the same house by way of registered gift deed in the year 2005.
Hence the rent amount will be included in your Income computation and will be taxed accordingly.
Section 25 stipulated a list of such kind of property and the same is reproduced below:
For the purposes of sections 20 to 24, the “owner” in relation to a property or any part thereof shall include—
(a) an individual who transfers without adequate consideration, any property to the spouse (except under an agreement to live apart), or to a minor child (other than a married daughter);
(b) the holder of an impartible estate, and he shall be deemed to be an individual owner in respect of all the properties comprised in the estate;
(c) a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association;
(d) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882;
(e) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or its part—
(i) by virtue of transfer of such property by way of sale or exchange or original or extendible lease for a term of not less than twelve years; or
(ii) accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease which has the effect of enabling the enjoyment of such property
Author Bio
Very nicely explained the entire provisions of Income from House Property along with clear examples including case laws of M/s. Sachin Tendular before ITAT, Mumbai.
Keep sharing such a vital input to all.