Owning a house brings comfort — and a tax head called ‘Income from House Property.’ This guide explains how income is computed, what deductions you can claim, and the key compliance points in an easy-to-follow manner.
1. Who is taxed?
Tax is chargeable in the hands of the owner — and sometimes a ‘deemed owner.’ If you transfer property to your spouse or minor child (without adequate consideration) you may still be treated as the owner for tax purposes.
2. Compute Gross Annual Value (GAV)
For let-out property, the GAV is the higher of (a) expected rent (based on municipal valuation or fair rent, capped by standard rent) and (b) actual rent received/receivable; vacancy rules apply. For a self-occupied home, GAV is generally nil.
3. Net Annual Value (NAV)
From GAV, deduct municipal taxes actually paid by the owner during the year to arrive at NAV — the base for statutory deductions.
4. Deductions under Section 24
Two main deductions reduce NAV:
• Standard deduction: 30% of NAV (flat).
• Interest on borrowed capital: Interest on home loans for acquisition/construction/repair is allowable — for let-out properties the interest is generally fully deductible; for self-occupied properties the deduction is subject to statutory caps.
Quick Worked Example
Expected rent ₹1,00,000; actual rent ₹1,20,000 → GAV ₹1,20,000. Municipal taxes paid ₹6,000 → NAV ₹1,14,000. Standard deduction (30%) = ₹34,200. If interest = ₹50,000, taxable income = ₹29,800.
5. Co-owners and Special Cases
Co-owners declare income in their share. If you own more than two self-occupied houses, the extras are deemed let-out. Deemed-owner provisions and co-owner rules must be checked.
6. Losses: Set-off & Carry Forward
A loss under house property may be set off against other heads in the same year (subject to rules). Any unabsorbed loss can be carried forward for eight assessment years and thereafter set off only against house property income.
7. Compliance — Reporting & TDS
Declare computations in Schedule HP of the ITR and choose the correct ITR form. Keep rent agreements, municipal tax receipts and loan statements ready. If you receive rent, payers may need to deduct TDS if annual rent exceeds the prescribed threshold.
Documents to Keep
• Rent agreement, rent receipts, bank statements
• Municipal tax receipts
• Home-loan interest certificates
• Tenancy correspondence
• Maintenance bills
Practical Tips
• Keep a rent register
• Claim municipal taxes only when paid
• Keep lender interest certificates
• File returns on time to preserve carry-forward of losses
Conclusion
Income from house property reduces to three steps: establish owner, compute GAV → NAV, then apply Section 24 deductions. Keep clear records and use Schedule HP when filing.
FAQs
Q1: Can I take actual repair bills instead of 30% standard deduction?
No — the law allows a flat 30% of NAV as the standard deduction; specific expenses are not substituted.
Q2: How many self-occupied properties can I claim?
Generally two properties can be treated as self-occupied; others are deemed let-out.
Q3: Are municipal taxes deductible if the tenant paid them?
No — municipal taxes are deductible only when actually paid by the owner.
Q4: How is pre-construction interest claimed?
Pre-construction interest may be allowed in specified instalments after completion.
Q5: Where do I report income and deductions?
Enter details in Schedule HP of the relevant ITR form and follow e-filing guidelines.
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