Income from House Property – Detailed Explanation

Income from House Property is one of the five heads of income under the Income-tax Act, 1961. It
deals with tax on income earned from owning buildings or land attached to buildings (such as a
house, shop, office, godown, etc.).

1. Conditions for Taxability:

• You must be the owner of the property.

• Property must consist of a building or land appurtenant.

• Property must not be used for the owner’s business or profession.

2. Types of House Property:

• Self-Occupied Property – Annual Value = Nil.

• Let-Out Property – Rent received is taxable.

• Deemed Let-Out Property – If more than two houses are kept vacant.

3. Calculation Steps:

Step 1: Determine Gross Annual Value (GAV).

Step 2: Subtract Municipal Taxes paid.

Step 3: Apply deductions under Section 24:

• 30% Standard Deduction

• Interest on Housing Loan (up to ■2 lakh for self-occupied)

4. Final Formula:

Taxable Income = NAV – 30% Deduction – Interest on Loan

5. Example:

Rent (fair value): ■3,20,000

Municipal Taxes: ■20,000

Loan Interest: ■2,50,000

NAV = 3,20,000 – 20,000 = 3,00,000

Taxable Income = 3,00,000 – 90,000 – 2,50,000 = –40,000 (loss)