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Income from House Property Calculation

All you need to know about Income from house property, the provisions of applicability, chargeability, calculation of income and various deductions allowed.

The Income Tax Act governs the laws relating to income from house property u/s 22 to 27. It is one of the taxable heads of income. Any income earned by the owner of the property is considered in income from house property.

What is property? Property here refers to immovable property. It consists of any building (office, house, factory, godown, hall, shop, etc.) and any land attached to a building (garage, parking, playground, etc.).

Chargeability Section 22: The annual value of the property belonging to the assessee, who is the owner, is chargeable to tax under income from house property (provided the property is not used for any business or profession conducted by the assessee).

Particulars Amount
Gross Annual Value (GAV) 10000
Less: Municipal Taxes (2000)
Net Annual Value (NAV) 8000
Deduction under section 24  
i. Standard deduction (30% of NAV) (2400)
ii. Interest on loan (1500)
Income from House Property 4100

The Gross Annual Value is taken as higher of-

  1. Fair Rent
  2. Municipal Valuation
  3. Actual Rent

If house property comes under Rent Control Act, steps for computing GAV are:

  1. Higher of Fair Rent or Municipal Valuation
  2. Lower of amount calculated in (i) or Standard Rent
  3. Higher of amount calculated in (ii) or Actual Rent

Deductions allowed

  1. Municipal Taxes: Municipal taxes are reduced from gross annual value to compute Net Annual Value. This deduction is allowed if the owner pays the municipal taxes and these taxes are paid in the FY.
  2. Standard deduction @ 30%: Flat deduction of 30% is allowed from NAV to everyone.
  3. Interest on loan: Interest paid on any loan taken for constructing, acquiring, renewing, repairing or reconstructing property, is allowed as deduction.
    However, any amount paid as brokerage or commission for getting a loan is not allowed as deduction.