Income from house property is one of the five heads of income under the Income Tax Act. If you own a residential flat, a commercial office, a shop, or a plot with a building on it, the rental income (or the notional rent, if it is vacant) is taxed under this head. The only exception is a property used for your own business or profession, which is taxed under "profits and gains of business."
Many salaried employees with a home loan think Section 24(b) interest deduction is all there is to house property taxation. It is not. The computation starts with the Annual Value, runs through municipal taxes and a 30% standard deduction, and ends with the interest claim. Getting any step wrong can lead to a mismatch with AIS data or a missed loss set-off.
This guide covers the full computation for self-occupied, let-out, and deemed let-out property, with a worked example and ITR filing instructions for AY 2026-27.
Types of House Property
1. Self-Occupied Property (SOP)
A property you use for your own residence. You can treat up to two properties as self-occupied. For self-occupied property:
- Gross Annual Value = Nil
- Municipal taxes deduction = not applicable (since GAV is nil)
- Section 24(a) standard deduction = not applicable
- Section 24(b) home loan interest = deductible, capped at Rs 2,00,000 per year (old regime only)
Under the old regime, the result is usually a loss (zero income minus the interest paid), which you can set off against salary or other income.
2. Let-Out Property (LOP)
A property you have rented to a tenant. The full computation applies:
- Gross Annual Value = higher of actual rent received and the expected rent (municipal value or fair market rent, whichever is higher)
- Municipal taxes actually paid by you during the year are deducted
- Net Annual Value = GAV minus municipal taxes
- Section 24(a) standard deduction = 30% of NAV (automatic, no bills required)
- Section 24(b) home loan interest = fully deductible (no cap for let-out property)
3. Deemed Let-Out Property
If you own more than two house properties and choose to treat two as self-occupied, every additional property is treated as deemed let-out, even if it sits vacant the entire year. You must declare notional rent (expected rent based on fair market value or municipal rateable value) and pay tax on it.
The computation for deemed let-out property is the same as for let-out property: GAV (notional rent), minus municipal taxes, minus 30% standard deduction, minus home loan interest.
Step-by-Step Computation
Step 1: Determine Gross Annual Value (GAV)
For self-occupied property: GAV = Nil (no further calculation needed for Steps 2 and 3).
For let-out property:
The GAV is the higher of:
- (a) Actual rent received or receivable during the year
- (b) Expected rent (the higher of municipal rateable value and fair rent of similar properties in the locality)
However, if the property was vacant for part of the year and the actual rent received is less than the expected rent because of the vacancy, the actual rent becomes the GAV.
For deemed let-out property: GAV = expected rent (fair market value or municipal rateable value, whichever is higher). There is no actual rent to compare against.
Step 2: Deduct Municipal Taxes
Subtract municipal taxes (property tax, house tax, water tax) actually paid by you during the financial year. Taxes due but not paid are not deductible.
Net Annual Value (NAV) = GAV minus municipal taxes paid
Step 3: Apply Section 24 Deductions
Two deductions are available from the NAV:
Section 24(a): Standard deduction of 30%
A flat 30% of NAV is allowed as a deduction. You do not need to show any repair, maintenance, or insurance bills. It is automatic.
This deduction is available only when NAV is positive (i.e., for let-out or deemed let-out property). For self-occupied property where GAV is nil, there is no NAV to apply 30% on.
Section 24(b): Interest on home loan
| Property | Interest limit (old regime) |
|---|---|
| Self-occupied, loan taken on or after 1 April 1999 to buy or construct, construction completed within 5 years from the end of the FY of borrowing | Up to Rs 2,00,000 |
| Self-occupied, loan for repairs, or construction not completed within 5 years | Up to Rs 30,000 |
| Let-out or deemed let-out | Actual interest, no cap (loss set-off limited to Rs 2,00,000) |
The Rs 2,00,000 cap is a combined limit for both self-occupied properties.
Pre-construction interest: If you paid interest during the period between borrowing the loan and completing construction, that total pre-construction interest is allowed in five equal annual instalments starting from the year of completion. This applies to both self-occupied and let-out property.
For a detailed breakdown of Section 24(b) rules, joint loan treatment, and pre-construction interest calculations, see our Section 24(b) guide.
Income from house property = NAV minus Section 24(a) minus Section 24(b)
If the result is negative, it is a loss from house property.
Worked Example
Priya (age 38, salaried) owns two properties in FY 2025-26:
Property A: Self-occupied flat in Hyderabad
- Home loan outstanding: Rs 30,00,000 at 8.5% interest
- Interest paid during the year: Rs 2,45,000
- Municipal tax: Rs 8,000 (paid)
Property B: Let-out apartment in Bangalore
- Monthly rent received: Rs 30,000 (total Rs 3,60,000 for 12 months)
- Municipal rateable value: Rs 3,00,000 per year
- Municipal tax paid: Rs 15,000
- Home loan interest paid: Rs 1,80,000
Property A (Self-Occupied)
| Item | Amount (Rs) |
|---|---|
| Gross Annual Value | Nil |
| Municipal tax (not deductible for self-occupied) | 0 |
| Section 24(b) interest (Rs 2,45,000 paid, capped) | (2,00,000) |
| Income from Property A | (2,00,000) |
Note: Priya paid Rs 2,45,000 in interest, but only Rs 2,00,000 is deductible for self-occupied property. The remaining Rs 45,000 is not claimable.
Property B (Let-Out)
| Item | Amount (Rs) |
|---|---|
| Gross Annual Value (higher of actual rent Rs 3,60,000 and expected rent Rs 3,00,000) | 3,60,000 |
| Less: municipal tax paid | (15,000) |
| Net Annual Value | 3,45,000 |
| Less: 30% standard deduction under Section 24(a) | (1,03,500) |
| Less: interest under Section 24(b) | (1,80,000) |
| Income from Property B | 61,500 |
Total House Property Income
| Property | Income / (Loss) (Rs) |
|---|---|
| Property A | (2,00,000) |
| Property B | 61,500 |
| Net loss from house property | (1,38,500) |
Under the old regime, this Rs 1,38,500 loss (within the Rs 2,00,000 limit) can be set off against Priya's salary income. Under the new regime, Property A's interest is not deductible at all, so her house property income would be Rs 61,500 (Property B only).
Loss from House Property: Set-Off and Carry Forward
House property losses follow specific set-off and carry-forward rules:
Under the old tax regime:
- Loss from house property can be set off against income from any other head (salary, business income, capital gains, other sources) up to Rs 2,00,000 per year.
- Any loss exceeding Rs 2,00,000 is carried forward for 8 assessment years and can be set off only against future house property income (not against salary or other heads).
- Unlike most other losses, house property loss can be carried forward even if the return was not filed before the due date.
Under the new tax regime:
- Loss from house property cannot be set off against any other head of income. It can only be set off against house property income from another property in the same year.
- The loss that remains is treated as already given full effect and cannot be carried forward to later years (Section 115BAC; Section 202(3) of the Income-tax Act, 2025 carries the same rule).
TDS on Rent: What Landlords Should Know
Tax Rate Chart
TDS on Rent : Applicable Rates for FY 2025-26
Two sections apply depending on whether your tenant is a business entity or an individual/HUF
Section 194-I : Business/Professional Tenant
Rent > Rs 50,000 per month or part of a month (from April 1, 2025; earlier Rs 2,40,000 a year); tenants other than individuals/HUFs not liable to tax audit
Section 194-IB : Individual/HUF Tenant
Monthly rent > Rs 50,000; rate reduced from 5% from October 1, 2024; filed via Form 26QC
Source: Sections 194-I and 194-IB, Income Tax Act 1961; CBDT notifications FY 2025-26
If you are a landlord receiving rent, your tenant may be required to deduct TDS before paying you:
Section 194-I (business/professional tenants):
- Applicable to any tenant other than an individual or HUF not liable to tax audit (so companies, firms, and individuals/HUFs whose accounts were audited under Section 44AB in the preceding year)
- Threshold: rent exceeding Rs 50,000 per month or part of a month (from April 1, 2025; earlier Rs 2,40,000 a year)
- TDS rate: 10% on land, building, or furniture; 2% on plant and machinery
Section 194-IB (individual/HUF tenants):
- Applicable when the tenant is an individual or HUF not liable for tax audit
- Threshold: monthly rent exceeding Rs 50,000
- TDS rate: 2% (reduced from 5% with effect from October 1, 2024)
- Filed via Form 26QC (challan-cum-statement)
As a landlord, verify that TDS deducted by your tenant reflects correctly in your Form 26AS and Annual Information Statement (AIS) on incometax.gov.in/iec/foportal/ before filing your ITR. If there is a mismatch, contact your tenant to file or correct the TDS return.
How to Fill Schedule HP in the ITR
Schedule HP appears in ITR 1 (up to two house properties from AY 2026-27, with no brought-forward loss under this head), ITR 2, and ITR 3.
For each property, you need to provide:
- Property type: Self-occupied, let-out, or deemed let-out
- Address of the property
- Name and PAN of the tenant (for let-out property where TDS is applicable)
- Name and PAN of co-owner (if jointly owned, along with the percentage share)
- Annual Value / Gross Annual Value
- Municipal taxes paid
- Net Annual Value (auto-calculated in the e-filing utility)
- 30% standard deduction (auto-calculated)
- Interest payable on borrowed capital (Section 24(b) amount)
- Income from house property (auto-calculated after deductions)
If you own the property jointly, declare only your share of the rental income and claim deductions in proportion to your ownership percentage.
New Tax Regime Considerations
Under the new tax regime (Section 115BAC):
- Self-occupied property: Section 24(b) interest deduction is not available. The income from self-occupied property is simply nil (no loss can be generated).
- Let-out property: The full computation applies. Rent is taxable, 30% standard deduction is available, and Section 24(b) interest deduction for the let-out property is available with no cap.
- Loss set-off: Any loss from house property under the new regime cannot be set off against salary or other income. It can only be set off against other house property income in the same year, and the balance cannot be carried forward.
For most salaried employees with one self-occupied house and a large home loan, this means the Rs 2 lakh loss set-off benefit is lost in the new regime. Factor this into your regime comparison.
Transition to Income Tax Act 2025
From Tax Year 2026-27 (income earned from April 1, 2026), the Income Tax Act 2025 applies. The house property provisions are renumbered: income from house property, annual value and the deductions (30% standard deduction and interest) sit in Sections 20 to 22 (for example, the self-occupied interest limit is now in Section 22(1)(b), read with Section 21(6)).
The substantive rules are unchanged: the same 30% standard deduction, the same Rs 2 lakh cap on self-occupied property interest, the same two-property self-occupied limit. Only the section numbers have changed.
For AY 2026-27 returns (FY 2025-26 income, filed in 2026), the ITR forms still reference the old section numbers.
Tax Garden Can Help
Computing house property income correctly requires reconciling rental receipts, municipal tax payments, home loan interest certificates, co-owner splits, and pre-construction interest schedules. Getting it wrong triggers a mismatch with AIS and Form 26AS data that can lead to a defective return notice.
Tax Garden's tax compliance services handle the full Schedule HP computation, loss set-off optimisation, and regime comparison for property owners. See also our guides on Section 24(b) home loan interest and set-off and carry-forward of losses.
Frequently Asked Questions
Do I pay tax on a second house that is lying vacant?
You can treat up to two houses as self-occupied, with nil annual value. If you own a third or more, those are treated as deemed let-out even if vacant, and you must offer notional rent to tax, based on the higher of municipal value and fair rent in the locality. From that you deduct municipal taxes paid, the 30% standard deduction and any home loan interest.
Can I claim repairs or maintenance expenses on my rented flat?
No separate deduction is allowed for repairs, maintenance, painting or insurance. Instead, a flat 30% of the net annual value is deducted under Section 24(a), whether you spend more or less. Society maintenance charges paid by the owner are also not deductible separately, though municipal taxes actually paid by you during the year are deducted before the 30%.
How much house property loss can I set off against my salary?
Under the old regime, a loss from house property, usually caused by home loan interest, can be set off against salary and other income only up to Rs 2,00,000 a year. The rest is carried forward for 8 assessment years against future house property income only, and this carry-forward is allowed even if the return is filed late. Under the new regime, no set-off against salary or any other head is allowed, and the unabsorbed loss cannot be carried forward.
My tenant pays Rs 60,000 a month. Should TDS be deducted on the rent?
Yes. An individual or HUF tenant not liable to tax audit must deduct TDS at 2% under Section 194-IB when monthly rent exceeds Rs 50,000, and deposit it through Form 26QC. A business tenant covered by Section 194-I deducts 10% on building rent where it exceeds Rs 50,000 per month. Check that the TDS appears in your Form 26AS before filing.
How do co-owners report rental income from a jointly owned property?
Each co-owner reports only their share of the rent, municipal taxes, 30% standard deduction and home loan interest in their own Schedule HP, based on their ownership share in the deed. For a self-occupied jointly owned home, each co-owner who is also a co-borrower can claim interest up to Rs 2,00,000 under the old regime.
Work with the Trusted Tax & Compliance Services in Kondapur, Hyderabad - Tax Garden for expert GST filing, ITR, TDS, ROC, and startup compliance support.
Frequently Asked Questions: Tax Services in Kondapur & Hyderabad
What makes Tax Garden a preferred GST consultant in Kondapur?
Tax Garden is ISO 9001:2015 certified and backs every engagement with Kavach, our ₹50,000 error-protection cover. Our flat-fee, no-surprise pricing and dedicated account manager make us a compliance partner for startups and SMEs in Kondapur's HITEC City corridor.
Why is Tax Garden a trusted tax compliance partner in Hyderabad?
Trust comes from three pillars at Tax Garden. First, transparency: you know the exact fee before you sign up, and it never changes mid-year. Second, certified expertise: our compliance team is qualified, and the firm holds ISO 9001:2015 certification. Third, accountability: Kavach, our unique error-protection plan, covers up to ₹50,000 in service charges for any clerical mistake made by our team.
Is there a reliable tax consultant near me in Kondapur?
Yes. Tax Garden's office is in Kondapur itself (CWS One Building, Hanuman Nagar). You can book an in-person consultation or get everything done fully online via WhatsApp and our client portal. We serve walk-in clients by appointment and remote clients across all of Hyderabad and Telangana.
I want a friendly CA who explains things clearly. Is that Tax Garden?
Absolutely. Every client gets a dedicated account manager reachable on WhatsApp, plain-language explanations of what is filed and why, and proactive reminders before every deadline. No jargon, no surprises, just friendly, expert compliance support from Kondapur.
Where is Tax Garden located in Hyderabad?
Tax Garden is located at 4th Floor, South Block, CWS One Building, Hanuman Nagar, Kondapur, Hyderabad, Telangana 500084. We serve clients across Kondapur, HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, and all of Hyderabad.
Can I get GST filing and registration services in Kondapur?
Yes. Tax Garden offers end-to-end GST services from our Kondapur office: GST registration, GSTR-1, GSTR-3B, GSTR-9 annual returns, ITC reconciliation, e-invoicing setup, and GST notice handling for businesses of all sizes in Kondapur and Hyderabad.
Do you file ITR for salaried employees and businesses in Hyderabad?
Yes. Our Kondapur team files ITR for salaried employees, freelancers, consultants, business owners, LLPs, and companies across Hyderabad. We cover ITR-1 through ITR-6 with complete Chapter VI-A deduction reconciliation, AIS reconciliation, and proactive deadline management.
Which areas in Hyderabad does Tax Garden serve?
Tax Garden's Kondapur office serves clients across Hyderabad including HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, Begumpet, Secunderabad, Ameerpet, Kukatpally, Uppal, LB Nagar, and all of Telangana. Most services are available fully online.
What compliance services does Tax Garden offer for startups in Kondapur?
Tax Garden is a compliance partner for startups in Kondapur and Hyderabad's HITEC City corridor. We handle company incorporation, GST registration, TDS filings, payroll, ROC annual filings, director KYC, and annual ITR filing, all under one flat-fee plan.
How does Tax Garden's compliance model compare to traditional hourly accounting services in Hyderabad?
Tax Garden works on flat-fee monthly plans with a dedicated account manager, monthly compliance updates, and WhatsApp communication. Every entry flagged by our AI-assisted workflow is reviewed by our compliance team before filing, and Kavach covers up to ₹50,000 in service charges for clerical or data errors made by our team.
Sources
This guide is verified against incometax.gov.in/iec/foportal/ (Income Tax Department portal, Schedule HP instructions for AY 2026-27 and house property income guidance for salaried individuals), the Income Tax Act 1961 (Sections 22 to 27), the Income Tax Act 2025 (Sections 20 to 22), Finance Acts on TDS changes (Section 194-I threshold of Rs 50,000 per month from FY 2025-26, Section 194-IB rate reduction to 2% from October 2024), and confirmatory coverage from ClearTax (Income from house property and Section 24 guides), Bajaj Finserv (deemed let-out property), Tax2Win (house property income and loss set-off), TaxGuru (FAQs on house property under Income Tax Act 2025), and BankBazaar (Section 80D and loss from house property). All thresholds, deduction limits, and TDS rates reflect the amounts applicable for FY 2025-26 (AY 2026-27).
