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 categorized under the head ‘Income from House Property’.

• 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.

For a Self-Occupied Property: The Gross Annual Value (GAV) is typically considered as zero for tax purposes.

For a Let-Out Property: GAV is the higher amount between the actual rent received and the fair rental value of the property.

For a Deemed to be Let-Out Property: GAV is calculated as if it were rented, similar to a let-out property.

Determining the GAV is the first step in calculating income from a house property for tax purposes in India.

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.

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 the house property shall be accordingly determined for both these properties.

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’.

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.’

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’.

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 this 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.

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.

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.

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:

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.

​​​​​​​​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:

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 a 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 than X and standard rent. Municipal taxes paid can be deducted to arrive at the net annual value.

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 a 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 than X and standard rent. Municipal taxes paid can be deducted to arrive at the net annual value.

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.

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 a deduction provided it is paid by the owner during the given financial year.

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.

In the given case, both the parts of the house shall be treated as independent house properties i.e. they will be considered as 2 different 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

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.

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.

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

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.

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.

You can reduce your taxable income by the amount of principal you pay on your home loan EMI every year under Section 80C. The maximum deduction you can claim is Rs 1.5 lakh. However, this benefit is only valid if you keep the house property for at least five years after taking possession. If you sell it before that, the deduction claimed earlier will be added back to your income.

If you are a resident individual and you have only one house property, you need to file ITR 1 or ITR 4. If you have income or losses from multiple house properties you need to file ITR 2 or ITR 3.