Income from House Property —
Section 24, Let-out & Loss Set-off
How rental and home-loan income is taxed under the head "house property": the GAV-to-NAV computation, the 30% standard deduction, the Section 24(b) interest limit, and how house-property loss is set off against salary.
Income from house property is computed as Gross Annual Value (GAV) − municipal taxes = Net Annual Value (NAV), then NAV − 30% standard deduction (Sec 24(a)) − home-loan interest (Sec 24(b)) = taxable income. For a self-occupied house, GAV is Nil and only the interest deduction — capped at Rs 2,00,000 — applies (old regime). For a let-out property the full interest is allowed. Any house-property loss can be set off against other income only up to Rs 2 lakh a year, with the balance carried forward for 8 years.
Under the default new regime, the Rs 2 lakh home-loan interest deduction on a self-occupied property is not allowed, and a self-occupied house-property loss cannot be set off against salary. Let-out property is still computed under both regimes, but in the new regime a resulting loss cannot be set off against other heads. Check the specifics for your case at incometax.gov.in.
How House Property Income Is Computed
Rental income from a building or land appurtenant to it is taxed under the head "Income from House Property" (Sections 22–27). The computation is the same sequence for every property; only the inputs change between self-occupied and let-out.
| Step | Self-occupied (SOP) | Let-out |
|---|---|---|
| Gross Annual Value (GAV) | Nil | Higher of expected rent & actual rent received |
| Less: municipal taxes paid | — | Deductible if paid by owner |
| Net Annual Value (NAV) | Nil | GAV − municipal taxes |
| Standard deduction u/s 24(a) | — | 30% of NAV |
| Interest on loan u/s 24(b) | Up to Rs 2L (old regime) | Full interest |
Section references are to the Income-tax Act, 1961; corresponding provisions continue under the Income-tax Act, 2025 (AY 2026-27).
Self-Occupied vs Let-Out — Tax Treatment
From FY 2019-20 an individual may treat up to two houses as self-occupied (GAV Nil for both). A third or further house is treated as deemed let-out and notional rent is taxed even if it is empty.
Self-occupied property
- GAV taken as Nil — no rent taxed
- No 30% standard deduction (NAV is Nil)
- Interest u/s 24(b) capped at Rs 2 lakh (old regime)
- Up to 2 houses can be self-occupied
- Interest deduction not allowed in the new regime
Let-out / deemed let-out
- GAV = higher of expected rent & actual rent
- Municipal taxes paid are deductible
- 30% standard deduction on NAV u/s 24(a)
- Full home-loan interest allowed u/s 24(b)
- Notional rent taxed on 3rd+ house
The Rs 2 lakh Section 24(b) limit applies to the interest component of the EMI. The principal repayment is a separate deduction under Section 80C (within the Rs 1.5 lakh cap, old regime). Do not double-count the EMI. Pre-construction interest is allowed in five equal instalments from the year of completion, within the same overall limit for a self-occupied house.
Home loan on a self-occupied or rented flat? Get every deduction claimed correctly.
Talk to a Tax Expert →Let-Out Property — Worked Calculation
Scenario: a flat is let out for the full year. Actual rent Rs 3,00,000; expected/fair rent Rs 2,80,000; municipal taxes paid Rs 12,000; home-loan interest Rs 1,80,000. Here is the taxable figure under the head house property.
Let-out flat — FY 2025-26
Self-occupied flat — FY 2025-26
The let-out Rs 21,600 is added to total income and taxed at your slab. The self-occupied Rs 2,00,000 interest creates a loss that is set off against other income (old regime) — see the loss rules below and confirm your slab in our income-tax slabs.
Old regime tends to win if
- You pay high home-loan interest on a self-occupied house
- You also claim 80C, 80D and other deductions
- A let-out property throws up a large deductible loss
New regime may win if
- You have little or no home-loan interest
- Your overall deductions are modest
- You want the higher Rs 75,000 salary standard deduction & 87A rebate
Not sure which regime saves more on your home loan?
Compare regimes →Loss from House Property — Set-off & Carry-Forward
Home-loan interest often makes the house-property figure negative. The set-off of this loss against salary and other heads is capped at Rs 2 lakh in a year; the unabsorbed balance is carried forward.
| Situation | Set-off this year | Carry-forward |
|---|---|---|
| Self-occupied loss (old regime) | Up to Rs 2L vs other income | Excess not carried |
| Let-out property loss | Up to Rs 2L vs other income | 8 years vs future HP income |
| New regime — SOP interest loss | Not allowed | — |
| New regime — let-out loss | No set-off vs salary | Limited to house-property head |
The Rs 2 lakh inter-head set-off cap applies per year regardless of the actual loss size; the carry-forward can only offset future house-property income.
- Home-loan interest certificate from the lender
- Rent agreement & rent receipts (let-out)
- Municipal-tax payment challans
- Pre-construction interest schedule (1/5th)
- Co-owner share split, if jointly owned
- Old regime selected (for SOP interest)
- Principal repayment claimed under 80C separately
- Property completion / possession date
If self-occupied interest is, say, Rs 5 lakh, you can set off only Rs 2 lakh against salary and the remaining Rs 3 lakh cannot be carried forward for a self-occupied house. For a let-out property the excess loss is carried forward for 8 years, but only against future house-property income — not against salary.
Want us to compute house property income and file your ITR correctly?
Get ITR Filing Help →House Property Income — Frequently Asked Questions
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House Property Income — Computed & Filed Right
Whether you have a home loan on a self-occupied flat or rent out property, our CA-led team computes GAV to NAV, claims the 30% deduction and Section 24(b) interest, applies the loss set-off, and files your ITR — 100% online, across India.