Taxation · Income from House Property

Co-ownership and Composite Rent in Income from House Property

Updated 5 October 2026 · Fact-checked

When a house is co-owned with definite shares, each co-owner's income is worked out on their own share, as if they owned a separate property. When rent covers the building plus furniture or services, split it if the parts are separable: building rent goes under house property, the rest under business or other sources.

Understand Co-ownership and Composite Rent

Income from house property is taxed on the owner. If two or more persons own a property together, the question is whose income it is and how much each person reports. The rule is simple when the shares are definite and ascertainable. Each co-owner is taxed on their own share, and each one computes income separately, as if that share were a separate property.

This has a useful effect. Each co-owner computes the 30% standard deduction on their own share of NAV. If the property is self-occupied by co-owners, each one is treated as owning a self-occupied house, so each gets their own interest limit under the old regime. Any loss cap is also applied in each co-owner's own hands. You do not compute one figure for the whole house and tax it once. You compute, then split by share. For a let-out property where all owners share costs in the same ratio, computing the whole and dividing gives the same answer.

Now the second idea, composite rent. Sometimes the rent you receive is for the building and also for furniture, fittings or services such as lift, power backup, security or maintenance. The head of income depends on whether the building letting can be separated from the rest. If the rent for the building is separately identified, the building part is taxed as income from house property. The furniture or plant part is taxed under profits and gains of business or profession, or income from other sources, depending on whether it is a business. Where the letting of machinery, plant or furniture is taxed under income from other sources, the allowable deductions are depreciation as per the Income-tax Act, 2025 and the expenses incurred for earning that rent. The question should give the rate and the WDV, so use the figures given. Do not treat 10% block depreciation as a settled rule for non-business furniture. The 10% block rate is the rate for furniture when it is a business asset. If the letting of the building and the other assets is inseparable, the whole composite rent is taxed under a single head, usually business or other sources, based on the facts.

A third situation is a house partly let out and partly self-occupied. Treat each part as a separate property. Work out the let-out part as a let-out house and the self-occupied part with nil annual value. Split common expenses, such as municipal tax and loan interest, on a reasonable basis, usually area.

Always read the question for three things: are the shares stated, is the rent split given, and which tax regime applies. Under the new regime, interest on a self-occupied house is not deductible. The treatment of a house property loss also depends on the regime:

Old regime: the loss can be set off against income under other heads up to ₹2,00,000 in a year. This cap applies to the aggregate house property loss of the year (let-out and self-occupied together) in each co-owner's own hands. It is not applied separately to each property, and it is not applied once to the whole house. The unabsorbed loss is carried forward for 8 subsequent years and set off only against income under the head house property of those years.
New regime: the loss cannot be set off against income under other heads. It can be carried forward and set off against house property income of later years.

Interest on a let-out property is still allowed under the new regime. Where the question is silent, state your assumption.

Key rules to remember

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.

How to solve Co-ownership and Composite Rent questions

Use this order for any question on co-owned property or composite rent. It keeps each step visible for the examiner.

1Read the facts and list the owners, their shares, the use of each part (let out, self-occupied or vacant) and the regime assumed.
2Check whether the shares are definite. If yes, plan to compute for each co-owner on their own share.
3For composite rent, decide if the building rent is separately given. If yes, take only the building rent to house property. Send the furniture or services rent to business or other sources.
4For each let-out part, find Expected rent, Actual rent, Gross Annual Value, then deduct municipal taxes paid to get NAV.
5Deduct 30% of NAV as standard deduction and interest on borrowed capital. For a self-occupied part, take NAV as nil and allow interest within the limit.
6Divide the result by the share of each co-owner, or compute per co-owner if costs are borne differently.
7Handle the non-house-property rent separately: deduct depreciation or allowable expenses and show the head clearly.
8Show each head separately, write the final figures per person, and state your assumptions on regime and apportionment.

Quickest way: Compute once, split by share, and tag each rent part with a head

When to use it: Use the compute-once shortcut only for let-out co-owned property where all co-owners pay costs in the same ratio as their shares and the rent split is given in the question. Self-occupied shares are computed per co-owner, each with a separate interest limit. The ₹2,00,000 loss set-off cap is also tested in each co-owner's own hands. Do the MCQ version mentally and the written version in a neat table.

MCQs: first see if the shares are definite. If the property is let out, work out the whole property and multiply by the share.
MCQs: eliminate options that put furniture rent under house property, or that give a co-owner the standard deduction on the whole NAV instead of on their share.
MCQs: for a self-occupied co-owned property, do not compute the whole and multiply. NAV is nil, so compute each co-owner's share of interest and apply the self-occupied interest limit separately for each co-owner, not once per property.
MCQs: if the result is a loss under the old regime, apply the ₹2,00,000 inter-head set-off cap to each co-owner's aggregate house property loss in his own hands. Carry forward the unabsorbed loss for 8 subsequent years.
Written: show a column layout with Whole property and then the share of each co-owner. Examiners give step marks for GAV, NAV, deductions and the final share.
Written: label every rent part with its head, and state your assumption in one line, for example 'Old regime assumed' or 'Shares are definite'.

Common mistakes in Co-ownership and Composite Rent

Taxing the whole property income in one co-owner's hands.
Students compute as if there is one owner and forget the share rule.
Fix: First check if shares are definite. If so, divide the final income by share, or compute separately for each co-owner.
Giving one self-occupied interest limit for the whole property.
Students treat the property as one unit, not as separate shares.
Fix: Apply the limit per co-owner, on that co-owner's share of interest, if conditions are met and the old regime applies.
Including furniture or services rent in house property income.
Students see one rent figure and treat it all as property rent.
Fix: When the split is given, take only the building rent to house property. Tax the rest under business or other sources.
Taking 30% standard deduction on GAV.
Students mix up GAV and NAV.
Fix: Deduct municipal taxes first to get NAV, then take 30% of NAV.
Not apportioning costs for a partly let, partly self-occupied house.
Students compute one figure for the building.
Fix: Split the building into parts. Compute the let-out part normally and take nil annual value for the self-occupied part. Apportion common costs by area.
Deducting depreciation on furniture from house property income.
Students forget that furniture rent is a different head.
Fix: Depreciation on furniture is not a deduction against house property income. It is claimed against the furniture rent under the head where that rent is taxed (business, or other sources as per the Act). No depreciation is allowed on the building under house property.

Worked examples

Example 1

A and B jointly own a house in the ratio 60:40. The whole house is let out for the full year at ₹30,000 per month. Municipal value is ₹3,00,000 and fair rent is ₹3,12,000. Municipal taxes of ₹30,000 were paid by the owners during the year. Interest on the housing loan for the year is ₹1,50,000. Compute the income from house property of each co-owner.

Show the solution

Expected rent = higher of municipal value ₹3,00,000 and fair rent ₹3,12,000 = ₹3,12,000.
Actual rent = ₹30,000 × 12 = ₹3,60,000.
GAV = higher of expected rent and actual rent = ₹3,60,000.
NAV = ₹3,60,000 − ₹30,000 = ₹3,30,000.
Standard deduction = 30% of ₹3,30,000 = ₹99,000.
Interest on borrowed capital = ₹1,50,000.
Income of the whole property = ₹3,30,000 − ₹99,000 − ₹1,50,000 = ₹81,000.
A's share (60%) = ₹81,000 × 60% = ₹48,600.
B's share (40%) = ₹81,000 × 40% = ₹32,400.

Answer: Income from house property: A ₹48,600 and B ₹32,400. Total ₹81,000. This assumes the costs are borne in the share ratio.

Example 2

Mr. Rao lets out a house along with furniture for ₹40,000 per month for the full year. The rent for the building is ₹32,000 per month and for the furniture ₹8,000 per month, and the two can be separated. Municipal value is ₹3,60,000 and fair rent is ₹3,48,000. He paid municipal taxes of ₹36,000 and interest on the housing loan of ₹1,00,000. The written down value of the furniture at the start of the year is ₹4,00,000. The furniture letting is not his business. He incurred no other expenses for earning the furniture rent. Depreciation on the furniture is to be computed at 10% of the opening WDV, as given in this question. Compute the income under each head.

Show the solution

The rent is separable. The building rent goes to house property. The furniture rent goes to income from other sources.
Expected rent = higher of ₹3,60,000 and ₹3,48,000 = ₹3,60,000.
Actual rent of the building = ₹32,000 × 12 = ₹3,84,000.
GAV = higher of ₹3,60,000 and ₹3,84,000 = ₹3,84,000.
NAV = ₹3,84,000 − ₹36,000 = ₹3,48,000.
Standard deduction = 30% of ₹3,48,000 = ₹1,04,400.
Income from house property = ₹3,48,000 − ₹1,04,400 − ₹1,00,000 = ₹1,43,600.
Furniture rent = ₹8,000 × 12 = ₹96,000.
For letting of furniture taxed under other sources, the deductions are depreciation as per the Income-tax Act, 2025 and expenses incurred for earning the rent. Here there are no other expenses.
Depreciation at the rate given in the question, 10% of the WDV of ₹4,00,000 = ₹40,000.
Income from other sources = ₹96,000 − ₹40,000 = ₹56,000.
The two heads are kept separate. They are not added here because they are different heads.

Answer: Income from house property ₹1,43,600; income from other sources ₹56,000.

Exam tips

Look for the words 'definite and ascertainable shares'. They signal you should compute per co-owner.
In composite rent questions, check if the rent split is given. If it is, tax the building rent under house property and nothing else under that head.
Show GAV, NAV, standard deduction and interest as separate lines. Each earns step marks even if a later step is wrong.
State the tax regime and any apportionment basis in one line. If the question is silent, say so and proceed.
In MCQs, check which head the furniture or services rent belongs to before you compute. Many wrong options come from the wrong head.

Practice questions from Income from House Property

Co-ownership and Composite Rent in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA IntermediateSpecial Cases: Co-owners, Arrears and Unrealised Rent

Co-ownership and Composite Rent: frequently asked questions

How is income taxed when a house has two co-owners?

If the shares are definite and ascertainable, each co-owner is taxed on their own share. You compute the income for the property and then split it by share, or compute each co-owner's income separately. Each co-owner's deductions, such as the 30% standard deduction, are worked out on their own share. If there is a loss under the old regime, each co-owner's aggregate house property loss is capped at ₹2,00,000 for inter-head set-off in his own hands, and the unabsorbed loss is carried forward for 8 subsequent years.

Can each co-owner claim the self-occupied interest limit?

Yes, if the property is self-occupied by each co-owner and the conditions for the limit are met, each co-owner may claim up to ₹2,00,000 on their own share of interest. This applies only under the old regime. Under the new regime, interest on a self-occupied house is not deductible.

What is composite rent in house property?

It is a single rent paid for the building and other things such as furniture, plant or services. If the building rent can be separated, only that part is house property income. The rest is taxed as business income or income from other sources.

How do I treat a house that is partly let out and partly self-occupied?

Treat the two parts as separate properties. Compute the let-out part as a let-out house, with GAV, NAV, standard deduction and interest. Take nil annual value for the self-occupied part. Apportion common costs, usually by area.