Income from House Property — How Rental Income Is Taxed

Gross Annual Value (GAV) is the higher of the actual rent received/receivable or the reasonable expected (lettable) rent of the property. Net Annual Value (NAV) is GAV minus the municipal taxes actually paid by the owner during the year. All further deductions — the 30% standard deduction and the home-loan interest — are computed on the NAV, not on the gross rent.

A property you live in is self-occupied and its NAV is treated as nil; you may claim up to two houses as self-occupied. A property actually rented out is let-out, taxed on real rent. If you own a third residential property that is neither self-occupied nor rented, it is "deemed to be let out" and taxed on its fair market rent even though no rent is received.

The 30% standard deduction under Section 24(a) is a flat deduction on the Net Annual Value of a let-out or deemed let-out property, allowed irrespective of actual expenses. It is meant to cover repairs, maintenance, insurance and collection costs — you cannot claim these separately on top of the 30%. It is not available for a self-occupied property because its NAV is nil.

For a self-occupied house the interest deduction under Section 24(b) is capped at Rs 2,00,000 a year (Rs 30,000 if the loan was not for purchase/construction or the property was not acquired/built within 5 years). For a let-out or deemed let-out property the full actual interest is deductible with no upper limit, though the loss it creates can be set off against other income only up to Rs 2 lakh. This deduction is available under the old regime.

Yes. For a let-out or deemed let-out property the entire interest paid during the year is deductible under Section 24(b) with no cap, unlike the Rs 2 lakh limit on a self-occupied house. But if that interest exceeds the net rental income and produces a loss, the loss can be set off against other heads only up to Rs 2 lakh in that year; the balance carries forward for 8 assessment years.

Interest paid on a home loan during the period before the property is completed is "pre-construction interest". It is not deductible in those years; instead the total is allowed in five equal annual instalments starting from the year the construction is completed / possession is taken. For a self-occupied house it still counts within the overall Rs 2 lakh Section 24(b) cap.

Yes, but with a cap. A loss from house property — which arises when Section 24(b) interest exceeds the NAV — can be set off against salary or any other head in the same year, up to a maximum of Rs 2,00,000 per year under the old regime. Any balance beyond Rs 2 lakh is carried forward for 8 assessment years and can then be set off only against future house-property income, not against salary.

A house-property loss that cannot be set off in the current year is carried forward for 8 assessment years immediately following the year of loss, and in those years it can be set off only against income from house property. To carry it forward you must file your ITR by the due date; a belated return still allows the same-year set-off of up to Rs 2 lakh but not the carry-forward.

No. Under the new (default) regime the self-occupied home-loan interest deduction is not available, and a house-property loss cannot be set off against salary or any other head. You may still deduct interest on a let-out property, but only up to that property's own income — it cannot create a set-offable loss. If home-loan interest is significant, compare the old regime before filing.

For a self-occupied house, no — the new regime disallows the Section 24(b) interest deduction. For a let-out property the interest is allowed, but only to the extent of that property's income; it cannot produce a loss to set off elsewhere. The old regime, by contrast, allows the full Rs 2 lakh self-occupied interest and the Rs 2 lakh loss set-off, so borrowers often gain by choosing it.

Often, but not always. If your Section 24(b) interest plus 80C principal and other deductions are large, the old regime usually wins. If the home loan is small or nearly repaid, the new regime's lower slabs, Rs 75,000 standard deduction and 87A rebate (up to Rs 12 lakh taxable income) can save more even without the interest deduction. Run both with a calculator before filing.

Under Section 194-IB, an individual or HUF (not under tax audit) paying rent of more than Rs 50,000 a month to a resident landlord must deduct TDS at 2% (reduced from 5% w.e.f. 1 October 2024). It is deducted once — in the last month of the year or of the tenancy — and paid using Form 26QC without needing a TAN. The landlord claims it as tax credit in the ITR.

Income and deductions are shared in the ownership ratio. Each co-owner computes their share of NAV, claims 30% under 24(a) and interest under 24(b) in proportion, and reports the net figure in their own ITR. Where spouses are both co-owners and co-borrowers, each can independently claim interest up to Rs 2 lakh (up to Rs 4 lakh across the couple for a self-occupied house) and 80C principal within their own limit, if each repays from their own funds.

Yes. If you own more than two houses, the third and subsequent ones (of your choice) are "deemed to be let out" and taxed on their fair market rent even though no rent is received. You still get the 30% standard deduction and the home-loan interest deduction against this notional income. The rule discourages holding multiple vacant properties purely to avoid tax.

Salaried taxpayers with one house property and no capital gains generally use ITR-1 (Sahaj). If you have more than one house property, a carried-forward loss, or other complexities, use ITR-2 (or ITR-3 if you also have business income). Report the property under Schedule HP, entering GAV, municipal taxes, the 30% deduction and interest, then let the loss flow into set-off.