House Property Income is the income chargeable to tax under the head "Income from House Property" in respect of any property consisting of any buildings or lands appurtenant thereto, of which the assessee is the owner. Under Indian law, Sections 22 to 27 of the Income Tax Act, 1961 govern the computation of income from house property, which is based on the concept of "annual value" and permits deductions for municipal taxes, a standard deduction of 30%, and interest on housing loans under Section 24.
Legal definition
Section 22 of the Income Tax Act, 1961 is the charging section:
Section 22: The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property."
Key concepts:
Annual value (Section 23): For let-out property, the annual value is the higher of the actual rent received/receivable or the fair rental value (determined by reference to municipal rateable value and standard rent). For self-occupied property (one property), the annual value is taken as nil under Section 23(2).
Deductions permitted (Section 24):
| Deduction | Provision | Amount |
|---|---|---|
| Standard deduction | Section 24(a) | 30% of annual value |
| Interest on borrowed capital | Section 24(b) | Actual interest (let-out); up to Rs 2,00,000 (self-occupied, if loan taken after 01.04.1999 for acquisition/construction completed within 5 years) |
| Municipal taxes paid | Section 23(1) | Actual taxes paid during the year |
Self-occupied property: Up to two properties can be treated as self-occupied (from AY 2020-21), with annual value taken as nil. Interest deduction is capped at Rs 2,00,000 for self-occupied properties.
Let-out property: Annual value is computed; 30% standard deduction and actual interest paid are deductible with no upper cap on interest for let-out properties.
Deemed ownership (Section 27): Certain persons are treated as owners even if not legal owners — including a member of a cooperative society allotted a flat, a person who has acquired property under a power of attorney, and a person who has been allowed to take possession of a building under Section 53A of the Transfer of Property Act.
How courts have interpreted this term
Chennai Properties & Investments Ltd. v. CIT [(2015) 373 ITR 673 (SC)]
The Supreme Court held that rental income derived from property by a company whose main object is to hold properties and earn rent from them is assessable under "Income from House Property" and not under "Profits and Gains of Business or Profession." The Court clarified that the head of income is determined by the nature of the income, not by the intention or business of the assessee — ownership of property and earning of rent makes it property income, regardless of whether it constitutes the assessee's primary business.
Rayala Corporation v. ACIT [(2016) 386 ITR 500 (SC)]
The Supreme Court held that the annual value of a property under Section 23(1)(a) must be determined based on the reasonable expected rent — not on the actual rent received if the property is let out below fair market rent. The expected rent is the higher of the municipal rateable value and the fair rental value. Where actual rent exceeds the expected rent, the actual rent is the annual value.
CIT v. Sachin Tendulkar [(2017) 398 ITR 198 (Bombay HC)]
The Bombay High Court held that income from house property can result in a loss where the property is self-occupied and the assessee claims interest deduction under Section 24(b) — the annual value being nil and the interest deduction creating a negative figure. This loss from house property can be set off against income under other heads, subject to the cap of Rs 2,00,000 under Section 71(3A) for inter-head set-off (introduced by the Finance Act, 2017).
Why this matters
Income from house property affects virtually every property owner in India — whether an individual owning a single self-occupied home, a landlord with multiple rental properties, or a company holding commercial real estate. The computation framework under Sections 22-27 determines how rental income is taxed and what deductions are available.
For homeowners with housing loans, the interaction between Section 24(b) (interest deduction under house property) and Section 80C (principal repayment deduction) creates significant tax planning opportunities. A self-occupied homeowner can claim up to Rs 2,00,000 interest deduction under Section 24(b) and up to Rs 1,50,000 for principal repayment under Section 80C — potentially sheltering Rs 3,50,000 from taxation annually.
A common pitfall is the treatment of unrealised rent. If a property is let out but the tenant defaults, the unrealised rent can be excluded from annual value under Section 23(1), subject to conditions in Rule 4 — the tenancy must be bona fide, the assessee must have taken steps for recovery, and the defaulting tenant must have vacated the property. Practitioners should note that loss from house property can be set off against salary or other income only to the extent of Rs 2,00,000 per year; the balance is carried forward for 8 assessment years.
Related terms
Parent concept:
Related deductions:
Related tax heads:
Related exemptions:
Frequently asked questions
Can I claim loss from house property against my salary income?
Yes, but with a cap. Loss from house property (typically arising when the property is self-occupied and you claim interest deduction under Section 24(b)) can be set off against salary or any other head of income, but only up to Rs 2,00,000 per year under Section 71(3A). Any unabsorbed loss beyond this limit is carried forward for up to 8 assessment years and can be set off only against future income from house property.
How many properties can be treated as self-occupied?
From AY 2020-21, an individual can treat up to two properties as self-occupied, with the annual value of both taken as nil. If the assessee owns more than two properties that are not let out, only two can be self-occupied — the remaining are treated as "deemed let out" and taxed on their notional annual value. Before AY 2020-21, only one property could be claimed as self-occupied.
Is rental income from commercial property taxed differently?
No. The computation framework under Sections 22-27 applies uniformly to all building properties — residential and commercial. The 30% standard deduction under Section 24(a) and interest deduction under Section 24(b) apply to commercial property income in the same manner. The GST implications differ (commercial rent above Rs 20 lakh attracts 18% GST), but the income tax treatment is identical.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.