Income earned from an owned building or land attached to a building is generally taxable under the head Income from House Property. Depending on the type and use of the property, certain deductions may be claimed while calculating the taxable income.

The deduction available depends on whether the property is self-occupied, let out, deemed let out or partly let out, and whether the taxpayer has selected the old or new tax regime.

When Is Income Taxable as Income from House Property?

Income is generally taxable under this head when:

• The property consists of a building or land attached to a building;
• The taxpayer is the owner or deemed owner of the property; and
• The property is not occupied by the taxpayer for carrying on a taxable business or profession.

The property may be residential or commercial. It can include a house, flat, shop, office, warehouse or another building owned by the taxpayer.

Types of House Property

Self-Occupied Property

A property used by the owner for their own residence is generally treated as self-occupied. The annual value of up to two qualifying self-occupied properties may be taken as nil.

Let-Out Property

A property that is rented during the year is treated as let out. Its annual value is calculated using the applicable expected-rent and actual-rent rules.

Deemed Let-Out Property

If more than two properties are treated as self-occupied, the remaining property or properties may be treated as deemed let out even when no rent was actually received.

Partly Let-Out Property

If a property is partly self-occupied and partly rented, each portion may need to be considered separately according to its use.

Deductions Available from House Property Income

1. Municipal Taxes Actually Paid

Municipal or local-authority taxes may be deducted from the Gross Annual Value when:

• The taxes are borne by the property owner; and
• The taxes are actually paid during the relevant financial year.

A municipal-tax demand that remains unpaid cannot be claimed merely because it became due. Taxes paid directly by the tenant and not borne by the owner are also not deductible by the owner.

2. Standard Deduction of 30%

A deduction equal to 30% of the Net Annual Value is available under section 24(a).

This deduction is normally available for:

• Let-out properties;
• Deemed let-out properties; and
• The portion of a property treated as let out.

The deduction is fixed at 30%, irrespective of the actual amount spent on repairs or maintenance.

3. Interest on Borrowed Capital

Interest payable on money borrowed for acquiring, constructing, repairing, renewing or reconstructing a house property may be deductible under section 24(b).

Self-Occupied Property under the Old Tax Regime

A deduction of up to ₹2,00,000 may be available when:

• The loan was taken on or after 1 April 1999;
• The loan was used to purchase or construct the property;
• The acquisition or construction was completed within five years from the end of the financial year in which the loan was taken; and
• The required interest certificate is available.

The deduction may be restricted to ₹30,000 where the loan was taken before 1 April 1999, used for repairs or reconstruction, or the prescribed completion condition was not satisfied.

Where two properties are treated as self-occupied, the applicable ₹2,00,000 or ₹30,000 limit applies collectively and not separately to each property.

Let-Out or Deemed Let-Out Property

For a let-out or deemed let-out property, the actual eligible interest on borrowed capital may be deducted without a separate monetary ceiling under section 24(b).

However, the use of any resulting house-property loss depends on the tax regime selected.

Pre-Construction Interest

Interest relating to the period before the acquisition or completion of construction is generally allowed in five equal instalments, beginning from the year in which the property is acquired or construction is completed.

4. Arrears of Rent and Recovered Unrealised Rent

Arrears of rent or unrealised rent recovered in a later year are taxable in the year of receipt, even if the taxpayer no longer owns the property in that year.

A deduction equal to 30% of the arrears or recovered unrealised rent is allowed under section 25A.

Deduction Available According to Property Type

Old Tax Regime vs New Tax Regime

Example: Let-Out House Property

Assume the following:

• Annual rent: ₹4,80,000
• Municipal taxes paid by the owner: ₹30,000
• Housing-loan interest: ₹2,60,000

Set-Off and Carry-Forward of House Property Loss

Under the old tax regime, a loss under the head Income from House Property may generally be set off against income under another head up to ₹2,00,000 in the same year.

Any remaining eligible loss may be carried forward for up to eight assessment years. A brought-forward house-property loss can be adjusted only against future house-property income.

Under the new tax regime, a current house-property loss cannot be set off against income under another head.

Expenses That Are Not Separately Deductible

The following expenses are generally not separately deductible while calculating house-property income:

• Actual repairs and renovation expenses;
• Society maintenance charges;
• Brokerage paid for finding a tenant;
• Property insurance;
• Depreciation on the building;
• Housing-loan principal repayment;
• Personal travel or management expenses; and
• Municipal taxes that remain unpaid.

Reporting House Property Deductions in myITreturn

When entering property details in myITreturn:

1. Select the correct property type—self-occupied, let-out or deemed let-out.
2. Enter the complete property address and ownership percentage.
3. Report the gross rent received or receivable.
4. Enter municipal taxes actually paid by the owner.
5. Enter eligible housing-loan interest from the lender’s certificate.
6. Add each property separately if you own more than one property.
7. Review the final house-property computation before filing.

For a jointly owned property, report only your proportionate share of rent, municipal taxes, interest and the resulting income or loss.

Common Mistakes to Avoid

• Reporting net rent instead of gross rent;
• Claiming municipal taxes that were not actually paid;
• Claiming actual repair expenses in addition to the 30% deduction;
• Claiming self-occupied housing-loan interest under the new tax regime;
• Entering housing-loan principal as interest;
• Claiming the entire income despite partial ownership;
• Failing to report a deemed let-out property;
• Claiming all pre-construction interest in one year; and
• Setting off house-property loss against salary under the new regime.

Income-tax Act, 1961 and Income-tax Act, 2025

The Income-tax Act, 1961 applies to income earned during FY 2025-26 and reported for AY 2026-27. The Income-tax Act, 2025 applies from 1 April 2026 for Tax Year 2026-27 onwards.

Conclusion

The principal deductions available from income from house property are:

• Municipal taxes actually paid by the owner;
• A standard deduction of 30% of Net Annual Value;
• Eligible interest on borrowed capital; and
• A 30% deduction from arrears or recovered unrealised rent.

Correct classification of the property and selection of the tax regime are important. In particular, the new tax regime restricts the deduction for interest on a self-occupied property and the use of a house-property loss.

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