Income from house property FY 2025-26: how to compute annual value for self-occupied and let-out properties, Section 24B ₹2L interest deduction limit, 30% standard deduction on rent, deemed let-out rules for multiple houses, ₹2L loss set-off against salary, and new regime differences.
Income from House Property — Quick Reference
Self-Occupied Property — Tax Treatment
Let-Out Property — How to Compute Income
Section 24B — Home Loan Interest Deduction
Deemed Let-Out — More Than 2 Houses
Loss from House Property — Set-Off Rules
New Regime — No House Property Deductions
Special Cases — Joint Ownership, Inherited Property
FAQs on Income from House Property
Key Rules at a Glance
| Type | Annual Value | Standard Deduction | Home Loan Interest | Result |
|---|---|---|---|---|
| Self-occupied (1 or 2 properties) | Nil (deemed zero by law) | None (NAV is zero) | Up to ₹2L deduction u/s 24B (creates a loss) | Loss of up to ₹2L against other income |
| Let-out property (rented out) | Higher of actual rent or fair rent | 30% of Net Annual Value | Full interest — no ₹2L cap | Net income taxable at slab rate |
| Deemed let-out (3rd+ property) | Fair market rent (deemed) | 30% of NAV | Full interest — no ₹2L cap | Net income taxable; actual rent not received |
| Under construction (pre-EMI interest) | N/A | N/A | Deductible in 5 equal instalments after possession (₹2L annual cap for self-occupied) | Deducted over 5 years post-possession |
Self-Occupied — Annual Value Is Zero
Under Section 23(2), for a property that you use for your own residence (or is not let out at any point), the Annual Value (AV) is deemed to be nil — zero income.
Maximum 2 properties can be treated as self-occupied simultaneously from FY 2019-20 onwards
If you own 2 houses and live in both (say, Mumbai and hometown), both can be self-occupied — no deemed rent on either
Since AV = nil, there is no gross income and no 30% standard deduction
However, home loan interest creates a LOSS — deductible under Section 24B up to ₹2L per year against other income
Section 24B — Self-Occupied Interest Deduction
Maximum deduction: ₹2,00,000 per financial year for self-occupied property
Loan must be for purchase, construction, repair, renewal, or reconstruction of residential property
Loan must be taken on or after April 1, 1999 for purchase/construction (for loans before this date, limit is ₹30,000)
Purchase or construction must be completed within 5 years from the end of the FY in which loan was taken
Pre-construction interest: deductible in 5 equal annual instalments starting the year of possession
Step-by-Step Computation for Let-Out Property
| Step | Explanation | Example (₹25,000/month rent) |
|---|---|---|
| Gross Annual Value (GAV) | Higher of: (a) actual rent received/receivable, OR (b) fair market rent/municipal value | ₹3,00,000 |
| Less: Municipal taxes paid | Property tax actually paid to municipal corporation (only if owner pays, not tenant) | |
| Net Annual Value (NAV) | GAV minus municipal taxes | |
| Less: Standard deduction u/s 24(a) | 30% of NAV — a flat deduction for repairs/maintenance, no bills required | |
| Less: Home loan interest u/s 24(b) | Full interest paid — NO ₹2L cap for let-out property | |
| Income from house property | NAV minus both deductions | |
| Tax on income | Taxed at slab rate as part of total income |
Unrealised Rent and Vacancy
If rent is unrealised (tenant didn't pay and has vacated): the unrealised portion can be deducted from GAV — requires notice for vacation, no other accommodation for tenant
Vacancy deduction: if property was vacant for part of the year, actual rent received (not fair rent) is used as GAV for those months
Arrears of rent received later: taxable in the year received after 30% standard deduction — even after property is sold
₹2L Cap for Self-Occupied vs No Cap for Let-Out
| Property Type | Section 24B Limit | Can It Create Loss? | Pre-construction Interest |
|---|---|---|---|
| Self-occupied | ₹2,00,000/year | Yes — loss of up to ₹2L set off against salary/other income | Deductible in 5 equal instalments after possession (within ₹2L annual cap) |
| Let-out | No limit — full interest deductible | Yes — if interest > rental income; loss set-off capped at ₹2L/year | Deductible in 5 equal instalments; no separate cap |
| Deemed let-out (3rd+ house) | No limit | Yes — same ₹2L annual cap on set-off | 5 equal instalments |
Pre-Construction Interest — How It Works
EMIs paid before taking possession of the house are called pre-construction EMIs. The interest portion of these is deductible but in 5 equal instalments starting from the year of possession.
Total pre-construction interest = sum of all interest paid from loan disbursement until March 31 of the year before possession year
Divide by 5 — claim this amount each year for 5 consecutive years
For self-occupied: this pre-construction interest instalment is part of the ₹2L Section 24B annual cap
Example: Total pre-construction interest = ₹5L → claim ₹1L/year for 5 years (within ₹2L cap for self-occupied)
When Deemed Let-Out Applies
From FY 2019-20, you can designate up to 2 properties as self-occupied (Annual Value = nil). If you own 3 or more properties, the remaining properties beyond 2 are treated as 'deemed let-out' — taxed even if they're not actually rented.
You choose WHICH properties to treat as self-occupied (choose the ones with the highest fair rent to minimise deemed income)
The deemed let-out property's Annual Value = fair market rent of the area (similar properties nearby)
From this deemed rent: deduct municipal taxes, 30% standard deduction, and full home loan interest
No actual rent receipt needed — but you're taxed on the notional fair rent
If the deemed let-out property is actually vacant: you still pay tax on the deemed rent (vacancy relief does not apply to deemed let-out)
₹2L Annual Cap on Loss Set-Off
If Section 24B interest on a self-occupied property (or on a let-out property with low rent) creates a loss under house property head, that loss can be set off against salary or other income — but only up to ₹2L per year.
Maximum loss from house property that can be set off against salary/other income: ₹2,00,000 per year
This cap applies per year regardless of how many properties you own or how large the interest payment
Unabsorbed loss (beyond ₹2L): carried forward for up to 8 assessment years; can only be set off against future house property income
The carry-forward loss can ONLY offset future house property income — not salary, capital gains, or other heads
Loss Set-Off — Worked Example
Rahul has salary income ₹15L. Self-occupied house loan interest: ₹3,60,000/year. After cap, only ₹2L is deductible.
| Item | Amount |
|---|---|
| Salary income | ₹15,00,000 |
| Annual Value (self-occupied) | ₹0 (nil) |
| Less: Home loan interest (actual ₹3.6L, capped at ₹2L) | −₹2,00,000 |
| Loss from house property | −₹2,00,000 |
| Net taxable income (₹15L − ₹2L) | ₹13,00,000 |
| Unabsorbed loss (₹3.6L − ₹2L) | ₹1,60,000 carried forward (can only offset future house property income) |
What Changes Under the New Tax Regime
| Feature | Old Regime | New Regime |
|---|---|---|
| Section 24B (home loan interest — self-occupied) | ₹2L deduction, creates loss set off against salary | ❌ Not available — no interest deduction for self-occupied |
| Section 24B (home loan interest — let-out) | Full interest deductible (no cap) | ✅ Available — let-out property interest can still be deducted |
| 30% standard deduction on rent | ✅ Available for let-out | ✅ Available for let-out |
| Municipal taxes deduction | ✅ Available for let-out | ✅ Available for let-out |
| House property loss set-off against salary | ✅ Up to ₹2L/year | ❌ Not allowed for self-occupied |
Joint Ownership
When a property is jointly owned, each owner is taxed on their share of house property income.
Each co-owner reports their proportionate share of rental income in their individual ITR
Section 24B: each co-owner can claim their proportionate share of home loan interest (up to ₹2L each for self-occupied, not shared)
Spouse co-ownership: if property is jointly owned with spouse (with equal loan EMI), both claim ₹2L each → combined ₹4L interest deduction saving
Example: Loan interest ₹4L, 50:50 ownership → each claims ₹2L Section 24B → total family saving at 30% slab = ₹2,49,600
Inherited Property
Inherited property: the inheritor is taxed on house property income from the date of inheritance
If property is self-occupied: Annual Value = nil; no home loan interest deduction unless inheritor takes a separate loan
Cost of acquisition for capital gains: original owner's cost + any improvement costs (for future sale)
Municipal taxes paid by inheritor: deductible against rental income in the year paid
How is income from a let-out property calculated?
Income from a let-out property = Gross Annual Value (higher of actual rent or fair rent) minus municipal taxes paid minus 30% standard deduction (flat) minus home loan interest (no cap for let-out). The remaining amount is added to your total income and taxed at slab rates.
What is the Section 24B deduction limit for home loan interest?
For self-occupied property: ₹2,00,000 per year. For let-out property: no limit — full actual interest paid is deductible. If interest on a self-occupied property exceeds ₹2L, the excess is lost (carried forward only as house property loss against future house property income).
Can I claim Section 24B deduction under the new tax regime?
Only for let-out property. Under the new tax regime, Section 24B home loan interest deduction for self-occupied property is NOT available — you cannot create or claim a house property loss. For let-out properties, the interest remains deductible under both regimes.
How many properties can I show as self-occupied?
From FY 2019-20, you can designate up to 2 properties as self-occupied (Annual Value = nil). If you own 3 or more properties, the remaining are treated as 'deemed let-out' — taxed on notional fair market rent even if they are unoccupied.
What is the maximum house property loss I can set off against salary?
A maximum of ₹2,00,000 of house property loss (from home loan interest on self-occupied property) can be set off against salary or other income per year. Any unabsorbed loss beyond ₹2L is carried forward for up to 8 years but can only offset future house property income.
Is rent received from parents' property taxable?
Yes. If you receive rent from a property you own and have let out to parents or anyone else, it is taxable as income from house property. However, if your parents own the property and you pay them rent, that is their income — and you can claim HRA exemption on the rent paid.
What is deemed let-out property?
If you own more than 2 properties, properties beyond 2 are treated as 'deemed let-out' — taxed as if they are rented even if actually vacant. The Annual Value is the fair market rent of similar properties in the area. You can deduct municipal taxes, 30% standard deduction, and full home loan interest.
Can both joint owners claim Section 24B deduction?
Yes. Each co-owner can independently claim their proportionate share of home loan interest under Section 24B. For self-occupied property, each co-owner's claim is capped at ₹2L individually — not shared between them. A couple with a joint home loan can each claim up to ₹2L, saving up to ₹4L in combined deductions.
What is the 30% standard deduction on house property income?
Under Section 24(a), 30% of Net Annual Value (rent minus municipal taxes) is allowed as a standard deduction toward repair and maintenance costs for let-out property. No bills or proof are required — it is a flat statutory deduction. This deduction is available under both old and new tax regimes for let-out properties.
How is pre-construction home loan interest deducted?
Interest paid on home loan before possession of the property is called pre-construction interest. Total such interest is divided by 5 and claimed as equal annual deductions starting from the year of possession. For self-occupied property, each annual instalment is subject to the overall ₹2L Section 24B cap.