Home > Income Tax > Help Center > House Property FAQsLast Updated: Dec 06th 2023
Income Tax on House Property Guide & FAQs
A guide on Income Tax on House Property and related FAQs. Covering income from House Property or Rental / Let-Out property, arrears of Rent, Pre-construction period, Home Loan Interest, part occupied, Unrealized rent, realized Rent, Standard Deduction, examples, self-occupied property
Rental income from a property being a building, land, or an apartment of which the assessee is the owner is charged to income tax under the head "Income from house property".
A property is considered to be a self-occupied when an individual uses it for their own living purpose. If they own more than one property, only one can be considered as a self-occupied property and the rest are considered to be let-out or deemed let out.
A scenario where an individual enjoys a fixed income from a property in the form of rent, it is known as Let out Property.
Two House properties can be taken as self-occupied and other properties if any even if it does not let out should be taken as deemed to be let out.
Put simply:
- If you have only one house in India and you have given it on rent, you would need to pay tax on rental income
- If you have only one house in India and you have not given it on rent, you do not have to pay any tax on that property. This is because that house will be deemed as self-occupied and there is no tax on self-occupied property.
- If you have two houses in India and have given both on rent, you would need to pay tax on rental income of both
- If you have two houses in India and you have not given either on rent, then two houses will be treated as 'self-occupied' and no tax will be levied. The other house will attract deemed rental tax provision. You will have the discretion to make the choice. In case you own a single commercial property in India which is lying vacant, you would need to pay tax on deemed rental on that property.
The amount received on account of arrears of rent (not charged to tax earlier) will be charged to income tax after deducting a sum equal to 30% of such arrears. It is charged to tax in the year in which it is received. Such amount is charged to tax whether or not the taxpayer owns the property in the year of receipt.
Any subsequent recovery of unrealized rent shall be deemed to be the income of taxpayer under the head "Income from house property" in the year in which such rent is realized (whether or not the assessee is the owner of that property in that year).
Income from house property in the case of a self-occupied property will be either Nil (if there is no interest on housing loan) or negative (i.e., loss) to the extent of interest on housing loan. Deduction in respect of interest on housing loan in case of a self-occupied property cannot exceed Rs. 2,00,000 or Rs. 30,000.
Maximum deduction will not be available in the following situations:
- If capital is borrowed before April 1, 1999 for purchase, construction, reconstruction, repairs or renewals of a house property;
- If capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
- If capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed. In the above situations only deduction up to Rs 30,000 can be claimed.
Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:
- If capital is borrowed before April 1, 1999 for purchase, construction, reconstruction, repairs or renewals of a house property;
- If capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.
Thus, total deduction available to the taxpayer account of interest will be 1/5th of interest pertaining to pre-construction period (if any) +Interest pertaining to post construction period (if any).
There are 2 deductions available:
- Standard Deduction
- Deduction of interest on a home loan
Standard Deduction of 30% is given to compensate annual repair and maintenance expenses incurred on House Property.
For Example:Suppose you have rented out a property and the net annual value was Rs. 12 Lakhs in the previous Financial Year. You can deduct 30% i.e. Rs. 3.60 Lakhs for the purpose of repair and maintenance, regardless of the actual amount spent by you on repair and maintenance. Your taxable income would thus be Rs. 8.40 Lakhs in the previous financial year.
In case of Let out and Deemed to be Let Out properties, you can deduct the actual interest paid by you on a loan taken for the purpose of buying, repairing, constructing, renewing or reconstructing the house property (unlimited).
Income chargeable to tax under the head "Income from house property" in the case of a let-out property is computed in the following manner:
| Particulars | Amount |
| Gross Annual Income value | XXXX |
| Less: Municipal taxes paid during the year | XXXX |
| Less: Deduction under section 24 | XXXX |
| Less: Deduction under section 24(a) @ 30% of NAV (Standard Deduction) | XXXX |
| Less: Deduction under section 24(b) on account of interest on borrowed capital | XXXX |
| Net: Income from house property | XXXX |
Gross Annual value of self-occupied property is ZERO. And property shall not be charged with Income-tax if the same is used by owner for his own business / profession. Hence, in this case, Income from house property is NIL.
Yes, if the loan is taken for purchase, construction, repair, renewal or reconstruction of the house. If the loan is taken for personal or other purposes then the interest on such loan cannot be claimed as deduction.