Summary: Income from House Property under the Income-tax Act, 1961 is covered by sections 22 to 27, while under the Income-tax Act, 2025 the corresponding provisions are contained in sections 20 to 25. The article states that the Income-tax Act, 2025, as amended by the Finance Act, 2026 and read with the Income-tax Rules, 2026, will be effective from 1 April 2026, and that there are no changes in the calculation of Income from House Property, although the section numbers have changed. Income arising from letting of a building, office, shop or land attached thereto owned by the assessee falls under this head, whereas property occupied for the assessee’s own business or profession does not. Section 20 provides that the annual value of property consisting of buildings or lands appurtenant thereto owned by the assessee is chargeable under this head. Section 21 deals with determination of annual value, including expected rent, actual rent, vacancy, local authority taxes, stock-in-trade properties and self-occupied properties. Section 22 provides deductions including 30% of annual value and interest on borrowed capital, including specified treatment of prior-period interest and limits for self-occupied property. Section 24 deals with property owned by co-owners where definite and ascertainable shares are separately included in their total income. The article concludes that, on comparing the Income-tax Act, 1961 and the Income-tax Act, 2025, there is no change in the calculation of income and only the sections have changed.
Introduction
We know that Income – Tax Act, 2025, as amended by the Finance Act, 2026 read with the Income – tax Rules, 2026 will be effective from 1st April, 2026. Section number are also change and will have to forget the section numbers of Income Tax Act-1961 within one or two years. At present we are able to give the section numbers of 1961 Act, because we are expert in this Act.
Income from House Property
Income from House Property are starting from section 22 to section 27, while under the Income Tax Act, 2025 the sections are from 20 to Section 25. There are no changes in calculation of Income from House Property.
Which kind of income will fall under this head, “Income from House Property” are any income arising out of letting of a building, office, shop or land attached thereto is owned by the assesse. If any property occupied for the purpose of business or profession carried on by him is not covered by this head.
As per Section 20(1) The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assesse shall be chargeable to income tax under the head “Income from House Property”.
(2) The provisions of sub-section (1) shall not apply to such portion of the property, as the assesse may occupy for his business or profession, the profit of which are chargeable to income-tax.
Section 21 of the Act, 2025: Determination of Annual Value
We have seen under section 20 of the Act, that Annual Value of the Property shall be chargeable to income tax. Now the question may arise in our mind that how the annual value of the property is to be decided?
The annual value of the 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 to let. The ordinary meaning of the words to let is to grant use of for rent or for hire which takes in its sweep the consent of granting use and occupation of a property for a license fee. In determining such notional income, several factors have to be taken in to consideration, such as actual realization by way of license fee, consideration received by the owner, the location of the property, the capacity of the property to fetch income depending upon demand and supply position over a period of years, etc.
Municipal valuation is one of the tests to be applied in determining the bona fide value of a property.
(2) If the property or any part of it is let and was vacant for the whole or any part of the tax year and due to such vacancy the actual rent received or receivable by the owner, the annual value of such property shall be deemed to be the amount so received or receivable.
(3) The annual value of the property shall be reduced by taxes levied by the local authority like, municipal tax, service tax etc., in respect of such property, paid by the owner of the property during the year.
(4) Where the property is held as stock in trade and is not let out at any time during the tax year, the annual value of the property shall be Nil up to two years from the end of the financial year in which the certificate for completion of construction is obtained.
(5) The annual value of property consisting of house or any part thereof shall be taken as Nil, if the owner use that property for his own residence.
The above provision shall apply only in respect of two of such houses as specified by the assesse. That means if any assesse is owning more than two properties which he is using for residence for four months in each property, then he has to choose that which property is liable for tax. Sections 23 & 27 of 1961, Act
Section 22 Deductions from House Property Income
Section 22 provides that income under the head “Income from House Property” is to be computed after making the following deduction from the annual value.
(1) a sum equal to 30% of the annual value as determined under section21;
(2) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital;
(3) where the capital referred to in above clause, during any period prior to the tax year in which the property is acquired or constructed, the amount of any interest payable for the said prior period in five equal instalments for the said tax year and for each of the four immediately succeeding the years.
(4) in the case of, interest paid for the self-occupied property, deduction will be restricted to Rs. 2,00,000, and if the capital borrowed before 31st March, 1999, deduction will be only Rs. 30,000.
Section 24 Property Owned by Co-owners
We know that there are certain property which are purchased jointly with more than one person. Now the question is how the income earned as rent from this property? As per section 24, where the property co-owned with definite and ascertainable share, the income computed separately under this part as per their respective share shall be included in their total income.
When it is included in this head, the relief available under this section shall be provided as if each co-owner is individually entitled to the said relief.
If we will compare the Income-tax Act 1961 and 2025, we will find that there is no change in calculation of income, only the sections are change.
