Section 20 of the Income-tax Act, 2025 charges the annual value of buildings and lands appurtenant to them, owned by the assessee, under the head Income from house property. Portions the owner occupies for their own business or profession are outside the charge.
What section 20 does
Section 20 is short — two sub-sections — but it fixes three things that decide whether the house property head applies at all: there must be a building or land appurtenant to it, it must be owned by the assessee, and what is taxed is the annual value, not the rent.
That last point is the one taxpayers most often miss. The head does not tax rent received; it taxes a notional figure called annual value, determined under section 21, of which the actual rent is only one input.
The house property block renumbers downward in the new Act. What was sections 22 to 27 of the Income-tax Act, 1961 is now sections 20 to 25, so the charging section moves from 22 to 20.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 22 | Charge on annual value of property | 20 |
| 23 | Determination of annual value | 21 |
| 27 | Deemed owner | 21 and 25 |
| 24 | Deductions — standard deduction and interest | 22 |
| 25A | Arrears and unrealised rent | 23 |
| 26 | Co-owners | 24 |
Section 20 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the charge
The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee, is chargeable under the head Income from house property. Three ingredients must be present: a building (or land appurtenant to a building), ownership, and an annual value determined under section 21. Vacant land on its own does not qualify — it must be appurtenant to a building.
Sub-section (2) — the self-occupied-for-business exception
The charge does not apply to portions of the property that the assessee occupies for their own business or profession, the profits of which are chargeable to income-tax. This prevents double counting: you cannot be taxed on a notional rent for premises whose cost is already reducing your business profit. Note that it works portion by portion, so a building part-let and part-used for business is split.
Worked example
A professional owns a three-floor building in tax year 2026-27.
| Floor | Use | Treatment under section 20 |
|---|---|---|
| Ground floor | Own clinic, professional income taxable | Outside the charge — sub-section (2) |
| First floor | Let out at ₹35,000 a month | Charged — annual value determined under section 21 |
| Second floor | Own residence | Charged, but annual value may be nil under section 21(6) |
| Adjoining vacant plot, not appurtenant to the building | Idle | Outside the head — taxable, if at all, under another head |
Only the first and second floors enter the house property computation. The ground floor is excluded outright by sub-section (2), and the clinic's rent-equivalent is not notionally taxed. The second floor may carry a nil annual value under section 21(6), subject to the two-house limit in section 21(7).
Compliance checklist and due dates
- Confirm ownership before applying this head — and check section 25, which extends 'owner' to several deemed-owner situations.
- Split a mixed-use building floor by floor or portion by portion; sub-section (2) operates on portions, not on whole buildings.
- Do not bring standalone vacant land into this head. It must be appurtenant to a building.
- Determine annual value under section 21, then take deductions under section 22.
Common mistakes
- Taxing actual rent instead of annual value. The charge is on annual value as determined by section 21.
- Notionally taxing premises used for one's own business. Sub-section (2) excludes them.
- Assuming a property held as stock-in-trade is always taxable — section 21(5) gives a two-year nil annual value in defined circumstances.
- Forgetting that the section numbers moved down: house property is 20 to 25 in the new Act, not 22 to 27.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.