CA Intermediate · Taxation

Income from House Property: formula sheet

Full chapter guide

Key formulas

Charge of the head: Taxable under this head = annual value of building or land appurtenant, of which the assessee is owner (actual or deemed), other than property used for own business or profession; Check all three conditions: a building or land appurtenant to it, an owner, and no use for the owner's own business or profession.
Owner test: Actual owner = person with legal title or who holds the property in his own right; An ordinary tenant or sub-tenant (lease of 12 years or less, or year to year) is not an owner. His sublet income is generally taxed under Income from Other Sources, or as business income if he is in the business of letting. A lessee under a lease for a term exceeding 12 years is a deemed owner, so the two cases are different.
Transfer to spouse: Transferor is deemed owner if the house is transferred, directly or indirectly, to spouse otherwise than for adequate consideration; The transfer may be direct or indirect. Exception: the transfer is in connection with an agreement to live apart. Then the transferor is not deemed owner and the spouse is taxed as actual owner.
Transfer to minor child: Transferor is deemed owner if the house is transferred, directly or indirectly, to a minor child otherwise than for adequate consideration; The transfer may be direct or indirect. Exception: a minor married daughter. The transferor is not a deemed owner under this provision in that case, and the minor is the actual owner. Any clubbing of the minor's income is decided separately under the clubbing rules.
Other deemed owners: Impartible estate holder; member of co-operative society, company or other association of persons allotted a house or part of a house under a house-building scheme (conveyance not executed); buyer in possession under part performance of a contract; lessee under a lease for a term exceeding 12 years; A lease from year to year, or for 12 years or less, does not make the lessee a deemed owner. A lease of exactly 12 years does not qualify.
Vacant plot: Vacant land is not house property; Its income, if any, is taxed under Income from Other Sources.
Expected rent (step 1): Higher of municipal value and fair rent; This is the starting point. It does not use actual rent at all.
Expected rent (step 2: standard rent cap): Expected rent = lower of [higher of municipal value and fair rent] and standard rent; Apply only if the property is covered by the Rent Control law and a standard rent exists.
Rent receivable: Monthly rent × months for which rent is receivable; Rent receivable is on due basis. Rent for the period of vacancy is not receivable. Unrealised rent is deducted in the next step.
Unrealised rent: Actual rent = rent receivable − unrealised rent (if conditions are met); Deduct it from rent receivable before comparing with expected rent and before the vacancy test. Do not deduct it from GAV afterwards. Deduct only if the conditions are satisfied.
GAV: no vacancy: GAV = higher of expected rent and actual rent; A low rent without vacancy does not reduce GAV below expected rent.
GAV: vacancy: If actual rent < expected rent because of vacancy, GAV = actual rent; If vacancy exists but actual rent is still at or above expected rent, GAV is the actual rent anyway, being the higher figure.
Annual value: Annual value = GAV − municipal taxes paid by the owner during the tax year; Municipal tax is deducted only if the owner paid it in that tax year. Details are in the deductions topic.
Annual value of self-occupied house: Annual value = Nil (up to two houses); Applies to a house used for own residence, or one not occupied because of work at another place, or one kept vacant and not let out.
Income of self-occupied house (old regime): Income = 0 − Interest on borrowed capital (maximum ₹2,00,000 in total for all such houses); The ₹2,00,000 limit needs a loan taken for acquisition or construction, with construction or acquisition completed within 5 years from the end of the tax year of the loan. Otherwise the limit is ₹30,000. The limit is one overall cap, not per house.
Pre-construction interest: Annual claim = 1/5 × interest for the period before completion; Claimed in 5 equal instalments from the year of completion. It is added to the current year's interest and the combined claim stays within the cap.
Deemed let-out house: gross annual value: GAV = Expected rent (higher of municipal value and fair rent, subject to the standard rent cap if the property is rent-controlled); There is no actual rent, so actual rent and vacancy allowance do not apply.
Deemed let-out house: income: Income = GAV − Municipal taxes paid by owner − 30% of net annual value − Interest on borrowed capital; Interest is allowed in full, with no ₹2,00,000 cap. Pre-construction interest is also allowed in 5 instalments.
Limit on number of houses: Nil value for any two houses of your choice; all others deemed let out; The assessee chooses the two houses that minimise tax. Where there is no interest, this usually means the two highest expected rents, because those become nil. Where interest is claimed, compare the total income under the alternatives before choosing.
Set-off of house property loss (old regime): Inter-head set-off = loss, limited to ₹2,00,000 a year; balance carried forward for 8 years; Under the new regime, a house property loss cannot be set off against other heads.
Income from house property (let-out): Income = NAV − Standard deduction − Interest on borrowed capital; NAV = Gross annual value − Municipal taxes paid by the owner during the year.
Standard deduction: 30% × NAV; Only when NAV is positive. Nil for self-occupied property, because its NAV is nil.
Pre-construction interest instalment: Interest from date of borrowing to 31 March before completion ÷ 5; Claimed each year for 5 years, starting from the tax year of acquisition or completion.
Interest cap, self-occupied (acquisition or construction): Current interest + Pre-construction instalment ≤ ₹2,00,000; Needs completion within 5 years from the end of the tax year of borrowing, and the lender's interest certificate.
Interest cap, self-occupied (other cases): Current interest + Pre-construction instalment ≤ ₹30,000; Applies to repairs, renewal or reconstruction, and to acquisition or construction loans where the 5-year condition fails.
Let-out property interest: Full interest accrued in the tax year + 1/5 of pre-construction interest; The interest deduction itself has no ₹2,00,000 cap. But a resulting house property loss can be set off against other heads of income only up to ₹2,00,000 in a year. The balance loss is carried forward for 8 years.
Taxable arrears or recovered unrealised rent: Taxable amount = Amount received − 30% of amount received = 70% of amount received; The 30% deduction is flat and applies on the full receipt. No other deduction is allowed against it.
Year of taxability: Taxed in the tax year of receipt, under the head Income from House Property; The year the rent relates to is irrelevant. Ownership in the year of receipt is also irrelevant.
Condition for arrears: Arrears are taxable only if the rent was not charged to tax in any earlier year; If it was already taxed in an earlier year, it is not taxed again.
Unrealised rent recovered: Unrealised rent allowed as a reduction in an earlier year, when recovered → taxable at 70% in the year of recovery; Applies only to rent that was earlier allowed as unrealised and has now been recovered.
Total house property income in the year: Income from current-year property (normal computation) + 70% of arrears or recovered unrealised rent; Compute the two parts separately, then add.
Co-owner's share of income: Co-owner's income = Income of the whole property × Share %; Applies only if shares are definite and ascertainable. Each co-owner then reports income on their own share.
Gross Annual Value (let-out): Expected rent = higher of Municipal value and Fair rent, but not more than Standard rent if the property is under rent control; GAV = higher of Expected rent and Actual rent. Exception: if the property was vacant for part of the year and the actual rent is less than the expected rent because of that vacancy, GAV = actual rent received or receivable.; Use this for the building part only in composite rent cases.
Net Annual Value: NAV = GAV − Municipal taxes paid by the owner during the year; Municipal tax is deducted only if the owner actually paid it in the year. With co-owners, each deducts what they paid.
Income from let-out house property: Income = NAV − 30% of NAV − Interest on borrowed capital; Standard deduction is 30% of NAV (for a co-owner, 30% of their share of NAV). Interest on a let-out property is allowed in both regimes. If the result is a loss, the old regime allows set-off against other heads up to ₹2,00,000 in a year. This cap applies to each co-owner's aggregate house property loss of the year (let-out plus self-occupied) in his own hands. The unabsorbed loss is carried forward for 8 subsequent years against house property income. The new regime allows no inter-head set-off, but the loss can be carried forward against house property income.
Self-occupied co-owned share: NAV = Nil; Income = − Interest, limited to ₹2,00,000 per co-owner (conditions apply); Each co-owner has a separate limit. Not available under the new regime, where interest on a self-occupied house is not deductible. The limit depends on the loan purpose and completion conditions stated in the question. A loss from this limit also counts towards the co-owner's own ₹2,00,000 aggregate cap for inter-head set-off.
Composite rent split: Building rent → House property; Furniture or services rent → Business or Other sources; For letting of machinery, plant or furniture taxed under other sources, the allowable deductions are depreciation as per the Income-tax Act, 2025 and expenses incurred for earning that rent. Use the rate and WDV given in the question. Do not assume 10% block depreciation for non-business furniture unless the question gives it. If the letting cannot be separated, tax the entire rent under one head, business or other sources, per the facts.
Partly let, partly self-occupied: Compute each portion as a separate property; apportion common costs by area; The self-occupied portion has nil annual value.
Intra-head set off: Net HP income = Σ income of profitable properties − Σ loss of loss-making properties; Done first, with no limit. Do this before looking at any other head.
Inter-head set off limit: Loss set off against other heads = lower of (net HP loss, ₹2,00,000); Applies per tax year, to the combined loss from all house properties. Not allowed where the question applies the default regime.
Loss to carry forward: Carried forward = Net HP loss − amount set off against other heads; Carried forward loss is set off in later years only against house property income.
Carry forward period: Up to 8 tax years immediately following the tax year in which the loss was computed; Set off in the earliest year possible; the oldest loss is adjusted first.
Set off of brought forward loss: Brought forward HP loss set off = lower of (brought forward loss, current year HP income); Never reduce salary or other heads with brought forward HP loss.

Quick revision

Income is taxed on annual value, not on rent actually received.
Expected rent is the higher of municipal value and fair rent, capped at standard rent where it applies. Gross annual value is the higher of expected rent and actual rent received or receivable. If vacancy makes the actual rent lower than expected rent, gross annual value is the actual rent.
Municipal taxes are deducted only if the owner bears them and pays them during the tax year.
Standard deduction is 30% of net annual value, and it is allowed whether or not you spent anything on repairs.
Interest on borrowed capital is deductible for let-out property in full; the interest itself has no ceiling. If it produces a loss, the loss rules in the point below decide what happens to that loss.
Self-occupied property has nil annual value. Interest on it is not allowed under the new regime. Under the old regime the cap is ₹2,00,000 for loans taken on or after 1 April 1999 for acquisition or construction completed within 5 financial years from the end of the year of borrowing, and ₹30,000 for loans taken before 1 April 1999 or for repairs, renewal or reconstruction.
Pre-construction interest is claimed in five equal instalments starting from the year of completion.
Arrears of rent and unrealised rent recovered get a 30% deduction and are taxed in the year of receipt.
Old regime: house property loss can be set off against other heads only up to ₹2,00,000 in a year, and the balance is carried forward. New regime: no set-off against other heads, and the whole loss is carried forward. Carry-forward is for eight years, against house property income only.
Co-owners with definite shares each compute their own share of income.

Common mistakes

Taxing the transferee when a house is gifted to the spouse or a minor child. Fix: If there is no adequate consideration, the transferor stays the deemed owner. Check the exceptions before concluding. If an exception applies, the transferor is not the deemed owner and the transferee is the actual owner.
Treating the minor married daughter like any other minor child. Fix: Write the rule with its exception: transfer to a minor married daughter does not make the transferor a deemed owner. Treat any clubbing of the minor's income as a separate question.
Ignoring standard rent when it is lower than the higher of municipal value and fair rent. Fix: Whenever standard rent is given, cap the expected rent at it before comparing with actual rent.
Treating a low agreed rent as vacancy loss and taking actual rent as GAV. Fix: Allow actual rent as GAV only when the shortfall is caused by vacancy. Otherwise GAV is the higher of expected and actual rent.
Applying the ₹2,00,000 interest limit to each self-occupied house separately. Fix: Treat ₹2,00,000 as one overall cap for all self-occupied houses together.
Treating a third house as self-occupied because the owner lives in it part of the year. Fix: Only two houses get nil value. Every other house is deemed let out, whatever its use.
Claiming the 30% standard deduction on a self-occupied house. Fix: Check NAV first. Self-occupied NAV is nil, so 30% of nil is nil.
Claiming all pre-construction interest in the year the house is completed. Fix: Divide by 5 and claim one instalment each year, starting from the year of completion or acquisition.
Spreading the arrears over the earlier tax years they relate to. Fix: Tax the whole receipt in the tax year of receipt. Do not revise earlier years.
Allowing repairs or municipal tax against the arrears. Fix: Only the flat 30% is allowed on arrears. Do not add any other deduction.

Exam tips

Learn the deemed owner cases with their conditions, including the member of a co-operative society, company or other association of persons. Examiners often change one condition in the facts, such as lease term or adequate consideration, to test you.
In MCQs, the common traps are the spouse and minor child exceptions and the lease rule (a term exceeding 12 years). Read the facts for these words first. When an exception applies, the transferor is not the deemed owner and the transferee is the actual owner. For a minor child, clubbing is decided separately.
In written answers, state the provision, apply it to the facts and give a clear conclusion. Do not start computing the annual value before you settle who is the owner.
Check the use of the property in every question. A house used for the owner's own business drops out of this head.
Quote section numbers of the Income-tax Act, 2025 only if you are sure of them. Otherwise state the rule in plain words and use the term tax year.
Read the question for the word 'vacant'. It tells you whether the vacancy rule is in play.
Always write expected rent as a separate working note. Many marks go to this step.
If standard rent is not mentioned, say 'no standard rent given' and move on. It shows the examiner you considered it.