Income from House Property under Income-tax Act, 2025: Sections 20 to 24

Summary: The Income-tax Act, 2025 consolidates the provisions relating to taxation of income from house property under Chapter IV. Sections 20 to 24 deal with chargeability, determination of annual value, deductions, taxation of arrears and unrealised rent, and treatment of co-owned properties. Section 20 provides that the annual value of a building or land appurtenant thereto owned by the assessee is chargeable under the head “Income from House Property”, subject to the specified conditions relating to the nature of property, ownership and use for business or profession. Section 21 provides the mechanism for determining annual value, including reasonable expected rent, actual rent, vacancy, municipal taxes, unrealised rent and self-occupied properties. Section 22 prescribes deductions including 30% of annual value and eligible interest on borrowed capital, with specified limits for self-occupied property. Section 23 provides for taxation of arrears of rent and unrealised rent subsequently recovered, with a 30% deduction. Section 24 deals with property owned by co-owners where their shares are definite and ascertainable, providing for separate computation in proportion to their respective shares and individual relief for self-occupied property. The article also sets out a broad computation of income under the head “Income from House Property”, beginning with Gross Annual Value, reducing municipal taxes to arrive at Net Annual Value, and thereafter providing for applicable deductions and eligible amounts in determining taxable income from house property.

Section 20: Income from House Property

The Income-tax Act, 2025 consolidates the provisions relating to taxation of income from house property under Chapter IV. Sections 20 to 24 deal with the chargeability, determination of annual value, deductions, taxation of arrears and unrealised rent, and the treatment of co-owned properties. A section-wise summary of the provisions relating to Income chargeable under the head house property is set out below:

Under section 20, the annual value of a property consisting of any building or land appurtenant thereto, owned by the assessee, is chargeable to tax under the head “Income from House Property.”

The following conditions are relevant for determining whether income is taxable under this head:

• Building or land appurtenant thereto: The income must be from building or land appurtenant thereto for chargeability under the head house property. The income from Vacant land is not chargeable under the head house property.
• Ownership: The property must be owned by assesse. If the property is not owned by assesse then income shall not be charged under the head house property (Example: Income from sub-letting of house is not taxable under the head house property and shall be charged under head “Income from other sources” or “Income under the head Business or profession”.
• Own Use: Section 20(2) provides that the provisions relating to income from house property do not apply to such portion of the property as is occupied by the assessee for the purposes of a business or profession carried on by the assessee, the profits of which are chargeable to tax..

Section 21: Determination of annual value

Section 21 lays down the mechanism for determining the annual value of a house property.

• The annual value shall be deemed to be higher of below:

(a) Reasonable expected rent

(b) Actual rent received / receivable

• If the property or part of property was vacate during the whole or part of the tax year and due to such vacancy, rent received / receivable is lower than actual rent received / receivable shall be deemed to be annual value.
• The annual value of property shall be reduced by municipal taxes, actually paid by owner during the tax year irrespective of when such taxes became payable.
• The unrealized rent shall not be included in actual rent received / receivable provided that conditions specified in rule 21 of Income Tax Rules, 2026 is fulfilled.
• The annual value of self-occupied property consisting of house shall be taken as ‘Nil’ and assesse can claim upto two of such houses as self-occupied.

Section 22: Deductions from income from house property.

After determining the annual value under section 21, the income from house property is computed after allowing the deductions prescribed under section 22.

The following deductions are available:

• The income under head house property shall be computed after making below deductions:

(a) 30% of Annual value,

(b) Interest on borrowed capital where property is acquired, constructed, repaired using borrowed capital

(c) Interest on borrowed capital for pre- construction/ acquisition period in five equal instalments starting from tax year in which construction / acquisition is completed.

• In case of self-occupied property, the maximum deduction allowable for interest is INR 2,00,000 for construction, acquisition of property and INR 30,000 in other case.
• If interest is payable outside India, such interest is not deductible where the applicable tax has not been paid or deducted and there is no agent in India as required under the Act.

Section 23: Arrears of rent and unrealised rent received subsequently

Section 23 provides a special mechanism for taxing arrears of rent and unrealised rent subsequently recovered.

• The amount of arrear of rent or unrealized rent received by assesseee is taxable under the head house property in the year of receipt whether assesse is owner in later year or not.
• A deduction of 30% is allowed from arrear/unrealized rent.

Section 24: Property owned by co-owners.

Where a property is jointly owned and the respective shares of the co-owners are definite and ascertainable, the co-owners will not be assessed collectively as an Association of Persons (AOP). Instead, the income from such property will be computed separately in the hands of each co-owner in proportion to their respective share and included in their individual total income.

Further, relief available for self occupied property will be allowed to each co-owner as if such co-owner were individually entitled to the relief.

Computation of Income under the head House Property:

The computation of income under the head “Income from House Property” can broadly be summarised as follows:

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The author thanks CA Anuj Malik (Partner, Sachin Narang & Co.) for valuable inputs and assistance in preparing this article. Have questions or need assistance? You can reach me at [email protected].