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Tax Planning

Income From House Property

Apart from earning from salary, there are many people who have earnings from letting out property on rent that is owned by them. This type of income is called 'Income from House Property.' The taxes levied on such income are discussed here.


What is the Section under which Income from house property is charged?


Section 22 of the income tax act states that the annual value of property consisting of any buildings or lands of which the assessee is the owner, other than such portions of such property which is let-out or it is occupied for the purposes of any business or profession carried on by him/her the profits shall be chargeable to Income- tax under the head " Income from house property"


Computing Income when house property is let out throughout the year?


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



How to calculate the Gross Annual value of the property which is let out throughout the year?


The GAV of the property can be calculated in the following manner:


How to calculate Reasonable Expected Rent (RER) of the property which is let out throughout the year?


The RER is the higher of:

  • Municipal value of the property
  • Fair rent 

​What does self-occupied property mean?

It refers to the property occupied by the assessee for self residence throughout the year.


Key Points

  • Municipal value refers to the value of the property determined by the municipal authorities.
  • Fair rent is the reasonable expected rent, which is basically the expected rent from similar property.
  • Standard rent is applicable to the properties covered under the Rent Control Act. It refers to the maximum rent that can be charged from the tenant under the provisions of the Rent Control Act.
  • Unrealised rent refers to the rental amount which was not received from the tenant.
  • What happens when an assessee has more than two houses?In case the assessee owns more than two houses, irrespective of whether the other house(s) are vacant or occupied by you, they will all be deemed to be let out. 
  • What is the taxability of the property which is partly self occupied and partly let out? In this case both are considered as separate units and income from house property is calculated separately for each unit of the house.
  • The maximum amount that can be deducted from loan interest is ₹2,00,000. The interest can be deducted by people who own two self-occupied housing properties. But the deduction can be reduced to ₹30,000 if the loan is taken before 1st Apr 1999 for construction of a new home or taken after 1st Apr 1999 to renovate an existing house.

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