House property and rent · Tax Year 2025-26
Self-occupied vs let-out property
A house you live in has nil taxable value but limited home loan interest relief. A house you let out is taxed on its net annual value with a 30% standard deduction. See how each is worked out, the loss limits and how the regime changes things.
On this page
A house you live in is a self-occupied property: its annual value is nil, and you can claim home loan interest up to ₹2,00,000 a year in the old regime. A house you rent out is let-out: you pay tax on rent less municipal taxes, less a 30% standard deduction, less the loan interest. The rules differ again between the old and new regimes.
This is signed off for the tax year 2025-26 and provisional for the tax year 2026-27, which repeats the same rules.
Side by side
| Self-occupied | Let-out |
|---|---|---|
Annual value | Nil | Rent received or letable value, less unrealised rent and municipal taxes paid |
Municipal taxes | Not deducted | Deducted from rent, if you paid them |
30% standard deduction | None | 30% of the annual value |
Home loan interest | Up to ₹2,00,000 in the old regime; nil in the new regime | The interest paid, with no cap on the claim itself in either regime (the loss you can set off against other income is limited, see below) |
Result | A loss equal to the interest claimed | Income, or a loss if interest is greater |
How a let-out property is worked out
- Gross rent received or receivable for the year, or the letable value.
- Less unrealised rent, which is rent you could not collect.
- Less municipal taxes you actually paid.
- The result is the annual value.
- Less the 30% standard deduction on the annual value.
- Less interest on borrowed capital.
- The result is the income from house property, which may be a loss.
Worked example
A flat is let for ₹30,000 a month. Rent for the year: ₹3,60,000. Municipal tax paid: ₹10,000. Loan interest: ₹1,50,000.
- Annual value: ₹3,60,000 − ₹10,000 = ₹3,50,000.
- 30% standard deduction: ₹1,05,000.
- Interest: ₹1,50,000.
- Income from house property: ₹3,50,000 − ₹1,05,000 − ₹1,50,000 = ₹95,000.
TaxCare's tax engine gives the same ₹95,000 for this flat in either regime, for the tax years 2025-26 and 2026-27.
Check the figures for your own facts with a Tax Expert.
Self-occupied house with a home loan
If you live in the house and pay ₹3,20,000 of interest, the claim is capped at ₹2,00,000 in the old regime, which creates a house property loss of ₹2,00,000. That loss reduces your other income. In the new regime the claim is nil, so you get no relief.
Loss set-off
- A house property loss can be set off against other income up to ₹2,00,000 a year in the old regime.
- In the new regime, no house property loss can be set off against other heads.
- A loss not used can be carried forward for 8 years and set off against house property income only.
- A belated return still lets you carry forward a house property loss.
Co-owned property
If you own a share, you report your share of the annual value and the interest. If the loan is joint, each co-owner claims their share of the interest.
More than one house
ITR-1 covers one house property. If you have more than one, you need ITR-2. See which ITR form to file.
Arrears of rent
Rent you receive later for an earlier year, or unrealised rent you later recover, is taxed in the year of receipt after a 30% deduction.
Documents for the return
- Rent agreement and rent receipts.
- Municipal tax receipts.
- The lender's interest certificate.
- Tenant name and PAN where the schedule asks (ITR-2 onwards).
- Co-owner name and PAN, where it applies.
Which regime suits you
If you have a large home loan on a house you live in, the old regime allows ₹2,00,000 of interest. Compare the total tax in both regimes before you decide. See old vs new tax regime and worked examples by salary. Under the Income-tax Act, 2025, which applies from the tax year 2026-27, the annual value is worked out under section 21, and the deductions from house property income are in section 22, whose sub-section (2) holds the ₹2,00,000 limit on interest for a self-occupied house.
How TaxCare helps
TaxCare takes the property details you enter, applies the annual value, 30% deduction, interest cap and loss rules for your chosen regime, and shows the effect on your tax in both regimes. It picks ITR-2 when you have more than one property. Complex cases, such as partly let houses, can go to a Tax Expert.
This guide gives general information and is not professional tax advice.
Questions on this topic
How much home loan interest can I claim on a house I live in?
Up to ₹2,00,000 a year in the old regime. In the new regime, none on a self-occupied house.
How is rent taxed on a let-out house?
Rent received, less unrealised rent and municipal taxes paid, gives the annual value. A 30% standard deduction and the loan interest come off it.
Can a house property loss reduce my salary income?
In the old regime, up to ₹2,00,000 a year. In the new regime, no. The excess loss can be carried forward for 8 years.
What is a deemed let-out property?
A house that is taxed as if it were let at its letable value even though it is not actually let. You can treat up to two houses you occupy as self-occupied; a third or further house is treated as deemed let-out.
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