Owning a house brings financial security, but it also comes with certain tax responsibilities. The Income Tax Act clearly defines how income from house property is calculated and taxed. Whether the property is self-occupied or rented out, knowing the rules can help you save tax and plan better.
What is Income from House Property?
Income from house property simply means the money you earn by renting out your home, office, or any other property you own. Even if you are not actually renting it, in some cases the law still assumes a notional income from it. Even if you don’t rent out your property, it can still be taxed because it is considered capable of earning rent.
Types of Properties Considered
- Self-Occupied Property – A house used for own residence. You can treat up to two of your houses as self-occupied, meaning you don’t have to pay tax on them as long as you or your family are living there.
- Let-Out Property – A house given on rent, or deemed to be let out if you own more than two houses.
How is Income Calculated?
The calculation of income under this head involves a few steps:
- Determine Gross Annual Value (GAV) – For self-occupied property, GAV is taken as nil. For let-out property, it is the actual rent received or expected rent.
- Deduct Municipal Taxes – Taxes paid to local authorities are reduced from GAV.
- Net Annual Value (NAV) – GAV minus municipal taxes gives NAV.
From the NAV, the following deductions are allowed:
- Standard Deduction – A flat 30% of NAV is always allowed, irrespective of actual expenses.
- Interest on Housing Loan – Full interest is deductible in case of let-out property. For self-occupied property, the limit is up to INR 2,00,000 under the old regime.
Quick Comparison
| Property Type | Annual Value | Standard Deduction | Interest Deduction | Loss Adjustment |
| Self-Occupied | Nil (up to 2 houses) | Not applicable | Up to INR 2,00,000 (old regime) | Set-off up to INR 2,00,000 |
| Let-Out Property | Rent or Expected Rent | 30% of NAV | Full amount allowed | Set-off up to INR 2,00,000 |
Key Takeaways for Taxpayers
- If you have a home loan, claim the interest deduction wisely as it often creates a notional loss that can reduce your taxable income.
- For those with let-out property, the flat 30% standard deduction ensures that some relief is always available.
- Keeping records of rent agreements, municipal tax receipts, and loan interest certificates is crucial during tax filing.
Understanding these provisions can make a big difference in tax planning. House property may feel like an expense, but when used smartly, it can also help you optimize taxes in FY 2024-25.