Income from house property: how it is taxed
How income from house property is computed under the Income Tax Act: the annual value, the 30% standard deduction, the home loan interest deduction capped at ₹2,00,000 for a self-occupied house, and the set-off limit on house property loss.
In this guide
Income from house property is taxed on the net annual value of a building or land attached to it. From the annual value the law allows two deductions: a flat 30% standard deduction for repairs and upkeep, and the full interest on a home loan for a let-out house. For a self-occupied house the annual value is nil and the interest deduction is capped at ₹2,00,000 a year. A resulting house property loss can be set off against other heads only up to ₹2,00,000 in a year, with the balance carried forward. In the Income-tax Act, 2025 the head is section 20 with deductions in section 22.
What is income from house property?
Income from house property is the tax head for the value of a building, or land attached to it, that a person owns. Section 20 of the Income-tax Act, 2025 charges this head, with deductions in section 22. It applies whether the property is let out or kept for the owner's own use.
The tax is not on rent received as such, but on the annual value of the property. For a let-out house that value tracks the rent; for a self-occupied house it is treated as nil.
How is annual value worked out?
The annual value is the amount the property could reasonably be expected to fetch as rent in a year. For a let-out house it is the higher of the expected rent and the actual rent received, reduced by municipal taxes actually paid by the owner.
The figure after deducting municipal taxes is the net annual value, and that is the base for the two deductions. For a self-occupied house the annual value is taken as nil, so this step produces no income.
Which deductions are allowed?
Only two deductions are allowed against the net annual value, and no other expense such as electricity or society charges can be claimed.
| Deduction | Amount | Note |
|---|---|---|
| Standard deduction | 30% of net annual value | Flat; no proof of repair spend needed |
| Home loan interest, let-out house | Full interest | No cap on the deduction itself |
| Home loan interest, self-occupied | Up to ₹2,00,000 | Per year, for purchase, construction, or repair |
How is a self-occupied house taxed?
A self-occupied house has a nil annual value, so there is no rental income to tax. The 30% standard deduction does not apply, because there is no annual value to take it from.
The one deduction that remains is home loan interest, up to ₹2,00,000 a year. Since the income side is nil, this interest usually produces a loss under the head, which is where the set-off limit becomes relevant.
How much house property loss can I set off?
A house property loss can be set off against income under other heads, including salary, up to ₹2,00,000 in a financial year. This is the reason a self-occupied home loan gives at most ₹2,00,000 of cross-head relief.
Any loss above ₹2,00,000 is carried forward for up to eight assessment years, but a carried-forward house property loss can be set off only against future income from house property, not against salary or other heads.
How do I compute the income?
- Take the higher of expected rent and actual rent for a let-out house.
- Deduct municipal taxes paid by you to get the net annual value.
- Deduct 30% of that net annual value as the standard deduction.
- Deduct the home loan interest, capped at ₹2,00,000 if self-occupied.
- Set off any loss against other income up to ₹2,00,000 for the year.
Where do taxpayers go wrong?
- Claiming actual repair cost on top of the 30% standard deduction.
- Deducting society or electricity charges under this head.
- Claiming the 30% deduction on a self-occupied house with nil value.
- Expecting more than ₹2,00,000 of loss to hit salary in one year.
- Setting off a carried-forward loss against salary rather than house property.
Where is this head published?
The head sits in sections 22 to 24 of the Income Tax Act, 1961, and in sections 20 to 22 of the Income-tax Act, 2025. For the wider set of deductions from total income, see our section 80C guide. Complied AI keeps CBDT / Income Tax updates in one feed, so you can open a change to the interest limit and read the section beside it.
Practical checks
Common questions
What deductions are allowed from income from house property?
Two deductions are allowed. A flat 30% standard deduction on the net annual value covers repairs and upkeep, whatever the actual spend. And the full interest on a loan taken to buy, build, or repair the property is deductible, without limit for a let-out house and capped at ₹2,00,000 a year for a self-occupied house.
What is the 30% standard deduction on house property?
The 30% standard deduction is a flat deduction of 30% of the net annual value, allowed for repairs and maintenance. It applies whether or not any repair spend was incurred, and no separate claim for actual repair cost is allowed on top of it. It does not apply to a self-occupied house, where the annual value is nil.
What is the home loan interest deduction limit?
For a self-occupied house, interest on a home loan is deductible up to ₹2,00,000 in a financial year. For a let-out house there is no cap on the interest deduction, though the overall house property loss you can set off against other income in a year is limited to ₹2,00,000.
How is a self-occupied house taxed?
A self-occupied house has a nil annual value, so there is no rental income to tax. You cannot claim the 30% standard deduction on it, since there is no annual value to apply it to, but you can claim home loan interest up to ₹2,00,000, which usually creates a loss under this head.
Can I set off a house property loss against my salary?
Yes, up to ₹2,00,000 in a year. A loss under income from house property can be set off against income under any other head, including salary, but only up to ₹2,00,000 for the year. Any loss above ₹2,00,000 is carried forward for up to eight years to set off against future house property income.
Is house property income taxed under the new regime?
Yes, but the loss set-off is restricted. The head itself is taxed under both regimes. Under the new regime, however, a house property loss cannot be set off against other heads such as salary, so the ₹2,00,000 interest on a self-occupied house gives no cross-head relief there.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 23 September 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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