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CHAPTER 3B: INCOME U/H HOUSE PROPERTY
Basis Of Charge (Section 22)
1. Property should consist of any building or land appurtenant thereto
2. Assessee must be the owner or Deemed Owner
3. HP Must be used for any purpose except business or profession of Assessee
Note: Annual value of HP held as SIT will also be taxable under this head. However, As per
Section 23(5) NAV of HP held as SIT shall be Nil for 2 years from the end of FY in which
completion certificate is issued, if Not Let Out for such period.
Computati on of Income Under House Property
Particulars Rs.
Gross Annual Value (GAV) -
Less: Municipal Tax (MT) Paid by Owner -
Net Annual Value (NAV) -
Less: Standard Deduction u/s 24(a) -
Less: Interest On Capital Borrowed u/s 24(b) – Due Basis -
Income U/H House Property -
Calculation Of GAV (S ect ion 23)
1. Fair Rent -
2. Municipal Value -
3. Standard Rent -
4. Expected Rent (Higher of 1 or 2 but restricted to 3) -
5. Actual rent Received or Receivable -
6. GAV (Higher of 4 or 5) -
Note: Municipal Taxes
1. Deducted from GAV if paid by Owner during previous year.
2. Deductible in PY of Payment even if they relate to past years.
Example.1 Calculate GAV
Fair Rent= 2,40,000; Municipal Val. = 2,30,000; Stand. Rent = 1,90,000; Actual Rent = 2,25,000
Example.2 Calculate GAV
Fair Rent = 2,40,000; Municipal Valuation = 2,50,000; Actual Rent = 2,40,000
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Example 3.Calculate GAV
Municipal Valuation = 50,000 p.m. ; Standard Rent = 45,000 p.m. ; Actual Rent = 42,000 pm
Illustration 1: Mr. X owns five houses in Chennai, all of which are let-out. Compute the GAV
of each house from the information given below –
Particulars House House II House III House IV House V
I
Municipal Value 80,000 55,000 65,000 24,000 75,000
Fair Rent 90,000 60,000 65,000 25,000 80,000
Standard Rent N.A. 75,000 58,000 N.A. 78,000
Actual rent received/receivable 72,000 72,000 60,000 30,000 72,000
Illustration 2: Mr. X has one house property which is let out @ 80,000 p.m. Fair rent 90,000
p.m., Municipal Valuation 70,000 p.m., Standard Rent 81,000 p.m. Municipal tax paid 60,000
and interest paid on loan for construction of house property is 50,000. Compute his Income.
Illustration 3: Mr. X has let out one House property @ 62,000 p.m., Municipal Valuation
72,000 p.m., Fair Rent 90,000 p.m., Standard Rent 1,00,000 p.m., Municipal Tax paid 40,000
and Interest on loan taken for construction 60,000 She has completed the age of 60 years on
01.04.2023. Compute Income
CASE A. Income of Ho u se Lying Va cant for So me Period
1. Calculate Expected Rent (ER) for whole year
2. Calculate Actual Rent (AR) for Let out period
3. Compare Expected Rent and AR
Situation 1: If AR > ER, then GAV = AR.
Situation 2: If AR < ER due to vacancy i.e AR+VR ≥ ER, then GAV = AR.
Situation 3: If AR < ER due to other reason i.e. AR+VR < ER , then GAV = ER
Example.4 Calculate GAV
Expected Rent = ₹ 2,40,000; Actual Rent = 35,000 p.m.; Vacancy = 3 month
Example.5 Calculate GAV
Expected Rent = 2,40,000; Actual Rent = 25,000 p.m.; Vacancy = 3 Month
Example.6 Calculate GAV
Expected Rent = 2,40,000; Actual Rent = 18,000 p.m.; Vacancy = 3 Months
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Illustration 4: Compute gross annual value in the following cases:
Particulars Situation Situation Situation Situation
1 2 3 4
Fair Rent (p.m.) 9,000 13,000 16,000 12,000
Municipal Valuation (p.m.) 10,000 9,000 18,000 19,000
Standard Rent (p.m.) 12,000 11,000 16,000 7,000
Rent received/receivable (p.m.) 7,000 11,500 16,000 20,000
Vacancy (Months) 1 1 2 2
Illustration 5: Mr. X constructed one house in 2020 and it is let out for 4 months and self
occupied for 6 months and vacant for 2 months during previous year 2024-25. Municipal
valuation of the house is 40,000 p.m. and fair rent 30,000 p.m. Standard rent of the house
is 38,000 p.m. It was let out @ 32,000 p.m. Municipal tax levied is 6,000 out of which 2,000
was paid by the tenant and 2,000 by the assessee and balance 2,000 yet to be paid. Interest
on the capital borrowed for construction of the house is 30,000. Compute his Income
Under The Head House Property
CASE B. Inc ome of Ho u se Let out For Part of the Year & Self Occupied for part o f the year
1. Calculate Expected Rent (ER) for whole year
2. Calculate Actual Rent (AR) for Let out period
3. GAV = Higher of ER Or AR.
Example.7 Calculate income under head House Property
• Fair Rent = 2,40,000 • Actual Rent = 21,000 p.m.
• Municipal Valuation = 2,00,000 • Let Out Period = 10 month
• Standard Rent = 2,20,000 • Self Occupied = 2 month
Example.8 Calculate Income under head House property
• Fair Rent = 2,40,000 • Let Out period = 6 month
• Municipal Valuation = 2,50,000 • Vacancy = 2 months
• Actual Rent = 30,000 p.m. • Self Occupied = 4 month
CASE C . Sel f-Occupied/ Uno ccupied Ho use Property (For Maximum 2 House Property)
1. GAV = Nil for 2 houses
2. Deduction of MT Paid shall not be allowed
3. Thus NAV = Nil
4. Interest on capital borrowed allowed subject to maximum 2,00,000 or 30,000 as the
case may be. (Only in case of Old regime)
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Note: Under default regime, no deduction is allowed for interest on capital borrowed of
Self occupied property. Hence, income of Self occupied property shall always be nil under
default regime.
CASE D. More Than 2 House Self Occupied
1. Any 2 Houses Shall be considered as Self occupied and dealt with accordingly.
2. Remaining house(s) shall be Deemed to be Let Out and its GAV Shall be Expected Rent.
Illustration 6: Mr. X has 3 houses which are self occupied and the details of these houses is
as under.
Particulars House 1 House 2 House 3
Fair Rent 11,00,000 12,00,000 11,50,000
Municipal Valuation 11,24,000 11,78,000 11,25,000
Standard Rent 13,00,000 12,50,000 11,40,000
Municipal Taxes Paid 1,00,000 80,000 90,000
Interest on Capital Borrowed 3,20,000 2,90,000 1,90,000
Repair charges 10,000 3,000 8,000
Compute income under the head house property
CASE E. Par t (Port ion) of the house if L et Out And Other Part (Porti on) Is Self Oc cupied
Let Out (LO) Portion Self-Occupied Portion
Compute income of let out portion 1. GAV = Nil
normally considering Following: 2. Deduction of MT Paid shall not be
a) ER shall be Computed for the part of allowed
property LO. 3. Thus NAV = Nil
b) MT Allowed for the part of property 4. ICB Shall be allowed for the part of
LO. property Self Occupied only under old
c) ICB shall be Allowed for the part of regime
property LO. (Subject To Maximum
(Suppose 60% portion is LO and 40% Is Self 30,000/2,00,000)
Occupied, then above 3 points shall be
calculated for 60% only)
Example.9
• Fair Rent = 2,40,000
• Municipal Valuation = 2,00,000
• Standard Rent = 2,10,000
• Municipal Taxes Paid for property = 10,000
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• Interest on capital borrowed for construction of Property = ₹1,50,000
• 50% of House property is Let out & 50% of house property is Self-Occupied
• Calculate Income Under head House Property As per optional Regime.
Example.10 House property is 50% let out + 25% self occupied +25% used for Business
• Fair Rent 3,60,000
• Municipal Valuation 3,00,000
• Standard Rent 3,20,000
• Actual Rent from let out property is 15000 p.m. (2 month Vacancy)
• Municipal Taxes Paid ₹ 15,000
• Interest on Capital Borrowed for repair of HP = ₹2,10,000
Calculate the income Under head house property under optional regime.
Illustration 7: Mr. X owns a house in Madras. During the previous year 2024-25, 2/3rd
portion of the house was self-occupied and 1/3rd portion was let out for residential
purposes at a rent of 8,000 p.m. Municipal value of the property is 3,00,000 p.a., fair rent is
2,70,000 p.a. and standard rent is 3,30,000 p.a. He paid municipal taxes @ 10% of municipal
value during the year. A loan of 25,00,000 was taken by him during the year 2019 for
acquiring the property. Interest on loan paid during the previous year 2024-25 was ₹
1,20,000. Compute Mr. X’s income from house property for the A.Y. 2025-26. All the
conditions for higher deduction of interest in case of self-occupied property is satisfied.
Treatment Of Unreali s ed Rent
Actual rent received/receivable should not include unrealised rent if all the conditions are
satisfied:
a) Tenancy is bona fide;
b) defaulting tenant has vacated HP;
c) defaulting tenant is not in occupation of another HP Of Assessee;
d) Assessee initiated legal steps to recover unrealized rent or satisfy AO that such will be
useless.
Example.11
• Expected Rent = 2,40,000 • Vacancy = 2 Month
• Actual Rent = 30,000 p.m. • Unrecovered Rent = 1 Month
Calculate GAV (all condition are Rule 4 are satisfied)
Example.12
• Expected Rent = 2,40,000 • Actual Rent = 30,000 p.m.
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• Vacancy = 2 Months • Unrecovered Rent = 3 Month
Calculate GAV (Assume all Rule 4 conditions are satisfied)
Illustration 8: Mr. X owns a house property at Adyar in Chennai. The municipal value of the
property is 5,00,000, fair rent is 4,20,000 and standard rent is 4,80,000. The property was
let-out for 50,000 p.m. up to December 2024. Thereafter, the tenant vacated the property
and Mr. X used the house for self-occupation. Rent for the months of November and
December 2024 could not be realised in spite of the owner’s efforts. All the conditions
prescribed under Rule 4 are satisfied. She paid municipal taxes @ 12% during the year. She
had paid interest of 25,000 during the year for Amount borrowed for repairs for the house
property. Compute his Income Under the Head House Property.
Tax li abili ty in respect of arrears of rent /R ecovery of Unr eali sed Ren t (S ection 25A)
Recovery of unrealized rent or arrears of rent received shall be taxable in the year of
receipt after standard deduction of 30%
Illustration 9: Mr. X has let out his house to State Bank @ 20,000 p.m. The bank has
increased the rent on 1st July, 2023 to 27,000 p.m. retrospectively w.e.f. 01.11.2023. The
assessee has paid municipal taxes of 7,000 during the previous year 2024-25. Compute
income under the head House Property.
St atutory Deducti on ( Section 24(a) )
Section 24(a), assessee shall be allowed a notional expenditure equals to 30% of NAV
Illustration 10: Mr. X, a British national, is a resident and ordinarily resident in India during
the P.Y.2024-25. He owns a house in London, which he has let out at £ 10,000 p.m. The
municipal taxes paid to the Municipal Corporation of London is £ 8,000 during the P.Y.2024-
25. The value of one £ in Indian rupee to be taken at 82.50. Compute Mr. X’s taxable income
for the A.Y. 2025-26
Int erest On Capital Borrowed ( Section 24(b) )
1) Pre- Construction Period Interest
It is the interest paid before the year in which construction is completed. Pre period
interest is accumulated and allowed in 5 installments from the year in which
construction is completed.
Eg. Loan is taken on 15/7/2021; construction is completed on 25/4/2024.
In this case interest for the period 15/7/2021 to 31/4/2024 shall be accumulated and
allowed in 5 installments from 2024-25 till 2028-29.
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2) Current Year interest (Relevant PY) – Allowed in same previous year on due basis.
Note:
1. Interest on loan is allowed as deduction if it is taken for the purpose of construction,
repair, renovation, reconstruction etc of house property.
2. Loan can be raised from banks, FI, NBFC, friends, family etc.
3. Interest is allowed on due basis.
4. Interest on fresh loan taken to repay original loan taken for house property shall be
allowed as deduction.
5. Brokerage/commission for Arrangement of loan is Not allowed.
6. Interest on unpaid interest is Not allowed.
7. If loan is taken from o/s India, Interest is deductible only if TDS is deducted.
Example.13 Loan of 15,00,000 @ 12% p.a. interest rate is taken on 1/12/21
Construction completion date = 21/1/25 (24–25)
Entire loan is outstanding
Calculate deduction u/s 24(b) for PY 2024–25
Example.14 Loan of ₹ 17,50,000 @ 12% p.a. interest rate is taken on 01/04/2018
Construction completion date = 15/12/20 (2020–21)
₹50,000 repay on 01/10 every year Since 1/10/19
Calculate deduction u/s 24(b) for PY 24–25
Example.15 Loan of 10,00,000 @ 12% p.a. Interest rate is taken on 1/7/22
Construction completion date = 31/12/24 (24–25)
Assume 100% of loan is outstanding
Calculate deduction of Interest on capital borrowing u/s 24(b)
Example.16 Loan of 20,00,000 @ 12% p.a. Interest rate is taken on 1/6/19
Construction completion date = 28/2/23 (22–23)
Assessee Repays 2,00,000 on 1/4 of every year since 1/4/22
Illustration 11: Mr. X took a loan of 5,00,000 on 01.10.2021 @ 10% p.a. for construction of
house which was completed on 31.03.2024. Compute interest on capital borrowed for the
previous year 2024-25.
Illustration 12: Mr. X has taken a loan of 15,00,000 on 01.07.2020 from State Bank of India @
12% p.a. for construction of one house which was completed on 01.05.2024 and was let out
@ 90,000 p.m. w.e.f 01.07.2024 and Fair rent is 1,25,000 p.m. and the assessee has paid
municipal tax of 30,000 in P.Y. 2024-25 and the assessee has repaid the loan Amount in
annual instalment of 1,00,000 starting from 01.01.2023. Compute his income for the
assessment year 2025-26.
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Illustration 13: Mr. X has taken a loan of 15,00,000 on 01.07.2020 from State Bank of India @
12% p.a. for construction of one house which was completed on 01.04.2024 and was let out
@ 90,000 p.m. w.e.f 01.05.2024 and Fair rent is 1,00,000 p.m. and the assessee has paid
municipal tax of 30,000 in P.Y. 2024-25 and the assessee has repaid the loan Amount in
annual instalment of 1,00,000 starting from 01.01.2023. Compute his income.
Illustration 14: Mr. X has constructed one house on 01.09.2023 and it was let out @ 1,25,000
p.m. and municipal taxes paid are 35,000. The house was constructed after taking a loan
from outside India and interest allowed under section 24(b) is 2,10,000, but the assessee
has not deducted tax at source. Compute assessee’s GTI for the year ended 31st March
2025.
Illustration 15: MR. X has one house property at Indira Nagar in Bangalore. She stays with
her family in the house. The rent of similar property in the neighbourhood is 25,000 p.m.
The municipal valuation is 23,000 p.m. Municipal taxes paid is 8,000. The loan of 20,00,000
was taken on 01.01.2018 from SBI Housing Finance Ltd. The construction was completed on
30.11.2020. The accumulated interest up to 31.03.2020 is 3,00,000. During the previous year
2024-25, Mr. X paid 1,88,000 which included 1,44,000 as interest. Compute Mr X’s income
from house property for A.Y. 2025-26. All the conditions for higher deduction of interest in
case of self-occupied property is satisfied.
Illustration 16: Mr. X has taken a loan of 5,00,000 on 01.10.2020 @ 10% p.a. for construction
of a house which was completed on 01.10.2022 and the house remained self-occupied
throughout the previous year 2024-25. The assessee has income under the head salary
4,00,000. Compute tax liability for assessment year 2025-26.
Restri cti on of deducti on in case of S elf Occupi ed Ho use p roperty
Situation Max.
Deduction
Loan for acquisition or construction of HP taken on/after 1.4.99 & such Rs. 2 Lakh
acquisition or construction is completed within 5 year from end of FY In
Which loan is taken.
Other Cases Rs. 30,000
Note: ICB in respect of SO property is allowed only under New regime.
Example.17
Particulars HP-1 HP-2
Self Occupied Let Out
Fair Rent 1,00,000 1,50,000
Municipal Valuation 90,000 1,20,000
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Standard Rent 1,50,000 1,60,000
Actual Rent NA 1,80,000
Municipal Taxes Paid 10% 10%
Interest on Capital Borrowed 25,000 25,000
Calculate Income of Mr. X for PY24–25 under both regime.
Co -owned Ho use Property
Co-owned Property Is Let Out Co-owned Property is Self Occupied
1. Calculate income of let out property 1. Calculated for each co-owner separately.
normally as a single owner. 2. NAV= Nil
2. Income so calculated shall be 3. Each co-owner is entitled for deduction of
divided between each co-owner on ICB of Rs.30,000 or Rs.2 lakh respectively
the basis of ownership right. (only in case of old regime)
Illustration 17: Mr. X is a co-owner of a house property alongwith his brother. Municipal
value of the Property 1,60,000; Fair Rent 1,50,000; Standard Rent under the Rent Control
Act 1,70,000; Rent received 15,000 p.m. The loan for the construction of this property is
jointly taken and the interest charged by the bank is 25,000 out of which 21,000 have been
paid. Interest on the unpaid interest is 450. To repay this loan, X and his brother have taken
a fresh loan and interest charged on this loan is 5,000. The Municipal taxes of 5,100 have
been paid by the tenant. Mr. X has 50% share in the house property. Mr. X has income from
Other Sources 2,60,000. Compute the income from this property chargeable in the hands
of Mr. X.
Deemed Owner (Section 27)
a) Transfer of HP to Spouse Transferor Spouse is deemed to be owner of HP
for Inadequate transferred. However, if Transferred under an agreement
consideration to live apart, then transferee spouse shall be considered as
owner.
b) Transfer of HP to Minor Transferor is deemed as owner of HP. However, HP is
Child for inadequate transferred to a minor married daughter, then deemed
consideration ownership not applied.
c) Member of a Co- Member to whom a building or part thereof is allotted or
operative Society leased under a House Building Scheme of a
society/company/association, shall be deemed to be owner
of that building.
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d) Person in possession of a If possession is received for part performance of the
property contract, then person having the possession is deemed
owner for income tax purpose.
e) Holder Of Impartible Deemed as owner of all properties in the estate.
Estate
f) Lease for 12 years or A person who acquires any building by way of lease for a
more period of 12 years or more shall be deemed to be the
owner of that building.
