Income from Self-occupied Property

Income from self-occupied house property - 5000 This loss will be set-off from your other income and will reduce the tax liability.

Income from Let-out Property

Calculate

Less: Deductions from Net Annual Value

Income from Let-out House Property: - 5000
Total Income from House Property - 5000

House property could be your home or any other building, including factory buildings, offices, shops, godowns and other commercial premises, or any land attached to the building like a parking lot, garden, garage etc. The Income-tax Act does not differentiate between commercial and residential property. Every type of property is taxed under the head ‘Income from House Property’ in the income tax return(ITR). You may compute such house property income using the calculator here Income From House Property Calculator. Follow the below steps to understand how the calculator is used in computing your house property income under various circumstances:

A) Income from Self-occupied Property

Where the property is occupied by you for your own residence or remains unoccupied throughout the year, then the income of 2 such house properties can be taxed as ‘Income from Self-occupied Property’ where the taxable amount shall be nil. However, you may claim interest on a home loan.

Select the assessment year for which you wish to file your ITR and enter the interest amount on the home loan paid during the previous year. You will now see your house property income generated on the screen. (calculator allows an interest amount more than INR 2,00,000 for self-occupied and the answer doesn’t appear)

B) Income from Let-out Property

Where the property is let out on rent for the entire year;

  • Select the assessment year for which you wish to file your ITR
  • To determine the annual value click on ‘calculate’ and enter the corresponding amounts in each box. (unrealised rent is included twice in the calculator-once in annual lettable value and once on the face of the calculator) Note:
    1. Enter ‘0’ if any of the fields do not apply to you.
    2. ‘Municipal valuation of property’ is the value determined by the municipal authorities for levying municipal taxes on house property.
    3. Market rent means rent which a similar property in the same locality would fetch.
    4. Standard rent is a rent fixed by the Rent Control Act.
    5. Other fields may not apply under the given case.
  • Enter the municipal taxes paid by you during the year
  • Enter the interest amount on the home loan paid during the previous year. By doing that, the calculator shall generate your income from let-out house property and your total income from house property.

C) Where let out property is vacant for part of the year

Follow the above steps and while filling amounts in the ‘Annual lettable value’ section, fill in the ‘loss of rent due to vacancy’.

Frequently Asked Questions

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What is “Income from house property”?

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Property may or may not yield a rental income. Thus, the income received or which could have been received if such property was let out on rent is categorised under the head ‘Income from House Property’.

Property here means:
  • land attached to a building like a garden, garage, etc. or
  • building, flat, house, bungalow, office, factory, a shop, godown etc.

Therefore, the property could either be residential or commercial.


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How to know if income from any of my properties is taxable under the head ‘income from house property’?

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Check for the following three conditions to check whether your income from any property will be taxable under the head ‘Income from House Property’:

  • There must be a property that is either a building or a land connected with a building. The building could mean flat, house, bungalow, office, factory, a shop, godown etc.
  • You must be the owner of such property in the previous year (PY). It is not material whether you are the owner in the Assessment Year (AY)
  • The property may be used for any purpose, but it should NOT be used by you for the purposes of business or profession from which you earn taxable profits.

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What does self-occupied property (SOP) mean?

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A self-occupied property is one that is used by you for your own residential purpose. If you own more than two such self-occupied properties, then only two such properties of yours will be treated as self-occupied and the rest will be treated as deemed to be let out property. The income from house property shall be accordingly determined for both these properties.


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I own a property, and I have not let out the property on rent. It is vacant. I do not earn any income from this property? Can there be a taxable income from such property?

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Yes, for Income-tax law, if there is a property, there will be income. However, the income could be either NIL, negative or positive. Thus, the income shall be computed even if you don’t receive rent from such property. However, there is an exception to this rule in the case of ‘property occupied by the owner for the purpose of his business.’ However, it is to be noted that the taxation of house property is different for ‘Self Occupied Property’, ‘Let out Property’ and ‘Vacant Property’.


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If I rent a property from someone and I sub-let it to a third party on rent, as I could not occupy that property or could only partly occupy it. Will this rent received from sub-letting be treated as house property income?

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The rent received can be taxed as ‘income from house property’ in your hands only when you are the owner of the property. However, in the given case, you are not the owner of the property but the tenant, and therefore, you are not legally entitled to receive any income from such property. Hence, the rent received by you from sub-letting or partly sub-letting the property shall not be taxed as Income from House Property but will be taxed as ‘Income from other sources.’


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I am not the owner of the land on which my house is constructed. But the house is registered in my name. Will I still be considered as the owner, and will the rent income from such property be taxed in my hands?

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As per the Income Tax Act, the one who owns the building need not necessarily be the owner of the land upon which it stands. Therefore, in the given case, you will still be considered an owner of the house property, and its income shall be subject to tax as ‘Income from House Property’.


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I have transferred my house property by way of gift to my spouse. We live together. Will the income from the house property be taxed in her hands?

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No. In the case of transfer of house property by a person to their spouse for inadequate consideration (i.e., for any amount lower than its market value), then the person transferring it shall be deemed to be the owner of such house. The only exception to this rule is when the transfer happens due to their agreement to live apart from each other. In which case, the transferee who receives such property will be the owner of the house property. (Section 27(i) of the Income Tax Act) In the backdrop of the above provisions, you will be deemed to be the owner of the house property and therefore, any income arising from it shall be taxed in your hands.


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I have transferred my house property by way of gift to my spouse as per our agreement to live separately. Will the income from the house property be taxed in her hands?

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Yes, as per the provisions stated in the above FAQ. Your spouse will be required to discharge tax in respect of any income received from such house property.


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I have transferred my house property to my unmarried minor child. In whose hands will the income from the house property be taxed?

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As per section 27(i) of the IT Act, in the case of transfer of property by a person to their minor child for inadequate consideration, the person transferring it shall be deemed as the owner of such house. The only exception to this rule is when the property is transferred to a minor married daughter.

Based on the above provision, you shall be the deemed owner of the house property in the given case, and therefore, any income from such property shall be taxable in your hands.


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How is income from house property computed?

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The income from house property is determined after allowing certain deductions from the property’s annual value or lettable value. Following are the steps for computation of income from house property:

Gross Annual Value (GAV) / Annual Value
  • GAV of the self-occupied property is Nil
  • GAV of the let out property is the amount of annual rent received
  • GAV of the vacant property shall be the annual amount of rent that could have been received if the property was given on rent. (expected rent)
Net Annual Value (NAV) Deduction of municipal taxes from GAV will give you NAV.

Note: The municipal taxes are only deductible if it they are paid and NOT when the amount is due.

Deductions under section 24:
a. 30% of NAV
b. Interest on home loan
Deduct 30% from NAV Deduction of interest on home loan serviced for purchase or construction of the house property Note: Only the loan that is used to purchase/ construct the property shall be considered. Any loan taken against the property shall not be considered for the interest deduction.

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What is meant by the annual value of the house property?

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Annual value is the term used in the Income-tax Act for the computation of income from house property. It is the amount that the property yields in a year as income, rent, service charges, etc. This forms the base for the computation of ‘income from house property’. Relevant additions/subtractions are made from such value to arrive at ‘income from house property.


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I have let out one of my properties for rent throughout the year. How do I compute income from such house property for income-tax purposes?

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​​​​​​​​The income chargeable to tax in the case of a let-out property is computed under the head "Income from house property" in the following manner:

Particulars Amount
Gross annual value XXX

Less: Municipal taxes paid during the year XXX
Net annual value XXX
Less: Deduction under section 24
  • Deduction under section 24(a) @ 30% of NAV
  • Deduction under section 24(b​) on account of interest on home loan
XXX
XXX
Income from house property XXX

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How to compute the annual value of a property which is let out throughout the year?

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Gross annual value is the higher of the following:

Expected Rent (ER) and
Actual rent received or receivable during the year.

However, the ER is higher of fair rent and municipal value, but such higher amount shall be restricted to standard rent, i.e. say higher of fair rent and municipal value is ‘X’, then ER shall be lower of X and standard rent. Municipal taxes paid can be deducted to arrive at the net annual value.


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How to compute the annual value of a let-out property which remained vacant for part of the year?

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If the actual rent is lower than the ER(as computed above), then the actual rent received or receivable will be the gross annual value of the property.


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How to compute the annual value of a self-occupied property?

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Annual value of upto 2 self-occupied properties can be taken to be NIL. Note that deduction for municipal taxes shall not be allowed in respect of such property/properties as annual value here means net annual value.


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How to compute the annual value of a property where it is let-out for part of the year and self-occupied for part of the year?

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If a property is self-occupied for part of the year and let-out for the remaining part of the year, then the ER for the whole year shall be considered for determining the GAV. Such ER for the whole year shall be compared with the actual rent for the let out period. The higher amount shall be adopted as the GAV. However, municipal tax for the whole year is allowed as deduction provided it is paid by the owner during the given financial year.


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How to compute the annual value of deemed to be let out property?

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Annual value of upto 2 self-occupied properties can be taken to be NIL. The other self-occupied/ unoccupied properties shall be treated as ‘deemed let out properties’. The ER shall be taken as the GAV. Municipal tax paid by the owner during the given financial year can be claimed as deduction.


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I have rented out a part of my house property and use the other part of the same house property for my residence. How will the income from house property be computed?

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In the given case, both the parts of the house shall be treated as independent house properties.

Their income shall be computed as under:

  • The part which you use as your residence shall be treated as a self-occupied property and the income shall be computed accordingly.
  • The part which you have let out on rent shall be treated as a let-out property and income shall be computed as income from let out property.

Likewise, it can be applied to multiple units of the house property


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If I borrow loan from friends and relatives for acquisition/construction of a house, will I be eligible to claim a deduction of such interest paid?

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Yes, you will be eligible to claim a deduction of interest paid on the loan borrowed from friends and relatives as the source of the loan does not matter. However, the loan taken must be utilized for acquisition, construction, reconstruction, repairs or renewal of the house property. However, note that to claim deduction of principal amount under section 80C, loan must be taken from a financial institution.


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I case of a let-out property, what is the maximum amount of deduction that can be claimed in respect of interest on housing loan?

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There is no limit on the amount of interest which can be claimed as deduction in case of a let-out property. Therefore, the entire amount of interest paid can be deducted from annual value.


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My spouse and I have invested equally in a house property and jointly own it. It is let out on rent. Can the rental income be taxed in both our hands equally?

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Yes, the rent received can be taxed in the hands of the co-owners in proportion to their ownership in the said property.


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I have received rent of past period in the current financial year. Will it be taxed in the current year?

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Any unrealized rent of the past periods shall be taxable in the year in which such income is realized (whether or not you are currently the owner of that property). The standard deduction of 30% of such unrealized rent shall be allowed. Taxable amount= Unrealised rent – 30% of Unrealised rent.


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I have paid property tax for the past years in the current year. Can I claim a deduction of such property tax paid?

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Yes. The entire amount of property tax paid can be claimed as deduction as the deduction is on a payment basis. Thus, it can be claimed in the year in which it is paid.

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