Income from house property explained

Income from house property is worked out like this: take the annual value (broadly, the rent), subtract municipal taxes paid, subtract a 30% standard deduction, subtract home loan interest, and the result is your income or loss from the property. A self-occupied house has nil annual value, so it gives only an interest claim, and only in the old regime.

The figures are for the tax year 2025-26 under the Income-tax Act, 1961. From the tax year 2026-27 the Income-tax Act, 2025 applies and renumbers the sections, so the section numbers named here are the 1961 Act's.

The types of property

You can treat up to two houses as self-occupied for your own residence, each with nil annual value. A further house is taxed as deemed let out, even if it is empty.

Step by step for a let-out house

1. Gross annual value: rent for the year, whether received or due.
2. Less unrealised rent: rent you could not recover. It cannot exceed the gross rent.
3. Less municipal taxes you actually paid in the year. This applies to a let-out house, not to a self-occupied one.
4. Annual value: the result of steps 1 to 3.
5. Less 30% standard deduction of the annual value. This is allowed whether or not you actually spent anything on repairs.
6. Less interest on a loan taken to buy, build, repair or renovate the house.
7. Income from house property. It can be negative.

Example

Rent received ₹3,60,000. Municipal tax paid ₹12,000. Home loan interest ₹1,50,000.

• Annual value: ₹3,60,000 − ₹12,000 = ₹3,48,000
• Standard deduction (30%): ₹1,04,400
• Interest: ₹1,50,000
• Income from house property: ₹3,48,000 − ₹1,04,400 − ₹1,50,000 = ₹93,600

Self-occupied house

The annual value is nil, so there is no rent to tax. You can claim interest up to ₹2,00,000 in the old regime, which creates a loss from house property. In the new regime the self-occupied interest deduction is nil.

Loss from house property

If interest exceeds the annual value, you have a loss. In the old regime you can set off up to ₹2,00,000 of the loss against other income, such as salary, in the same year. In the new regime you cannot set off a house property loss against other income. A loss you cannot set off in the year can be carried forward for eight years under the old regime, and in those years it can be set off only against income from house property. The new regime's carry-forward is not covered here.

Co-owned property

If you own a share, you are taxed on your share of the annual value and you claim your share of the interest. TaxCare records the co-owner and share. The other owner is taxed separately.

Arrears of rent

Rent received after the year it relates to (arrears, or unrealised rent recovered) is taxed in the year of receipt, after a 30% deduction.

What the department sees

Tenants who deduct TDS on rent are reported in Form 26AS or Form 168 and AIS. The rent you declare should match or exceed these figures. See what is AIS.

Which ITR form

ITR-1 allows one house property. More than one needs ITR-2 or ITR-3. See which ITR form should I file.

Old or new regime?

A home loan on a self-occupied house is a big reason to consider the old regime. Compare both. See old vs new tax regime and deductions allowed in the new regime.

How TaxCare helps

TaxCare asks for each property's use, rent, municipal tax, interest and share, applies the 30% deduction and the caps for the regime, and shows the effect of the loss rules in both regimes. Rent TDS from your AIS and Form 26AS or Form 168 is brought in for comparison. Nothing is submitted until you approve.

This guide gives general information and is not professional tax advice.