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CMA Intermediate · Direct and Indirect Taxation

Income from House Property for CMA Intermediate

Income from House Property taxes the annual value of buildings and land attached to them. You find the annual value, deduct 30% of it and the interest on borrowed capital under Section 22, and get the income. A negative result is a loss that can be set off or carried forward.

What this chapter covers

This chapter covers one head of income under the Income-tax Act, 2025. You learn when a property is taxed under this head, which incomes are exempt, how annual value is fixed for let-out, self-occupied and deemed let-out property, and how deductions under Section 22 lead to the final figure.

The chapter also covers special cases such as co-owners, arrears of rent and unrealised rent received later. It ends with the treatment of a loss: how it is set off against other heads and how it is carried forward.

This chapter links to the rest of Paper 7 in two ways. Its result feeds into gross total income, and its loss rules link to the set-off and carry-forward chapters. Its structure is also simple, so it is a good chapter to master early before moving to heavier heads.

House property is one of the most predictable numerical chapters in the taxation paper. The format is fixed: annual value, deductions, income. If you follow the steps, you earn step marks even when one figure goes wrong. The MCQs test small rules, such as the interest cap for self-occupied property and the carry-forward period for the loss, so a few hours of clean revision convert directly into marks. It also gives you practice with computation layouts that you will reuse for total income in other chapters.

Income from House Property: topics in the order to study them

  1. 1Chargeability and Basis of Income from House PropertyStart here to learn when income is taxed under this head at all, since every later step depends on that.
  2. 2Exempt Income from House PropertyNext, learn what is left out, so you do not compute income that is not taxable.
  3. 3Annual Value and Types of House PropertyAnnual value is the base of the computation, and the type of property decides how you work it out.
  4. 4Deductions under Section 22 and ComputationNow apply the 30% deduction and the interest deduction to the annual value and practise the full layout.
  5. 5Special Cases: Co-owners, Arrears and Unrealised RentThese are variations on the basic computation, so learn them only after the standard format is firm.
  6. 6Set Off and Carry Forward of House Property LossFinish with what happens when the result is negative, which needs the computation skills from earlier topics.

How to prepare Income from House Property

Treat this chapter as a format to master, not a list to memorise. Aim to be able to write the full computation from a blank page.

  1. Read the chargeability rules once and list in your own words the conditions for a property to be taxed under this head.
  2. Learn the three property types and write the annual value approach for each in one short line.
  3. Memorise the Section 22 deductions: 30% of annual value and interest on borrowed capital, with the caps of ₹2,00,000 and ₹30,000 in the cases the section describes.
  4. Solve at least five full computations by hand using one fixed layout: annual value, less 30%, less interest, income.
  5. Practise special cases separately: co-owners, arrears of rent and unrealised rent, where Section 23 allows a 30% deduction.
  6. Learn the loss rules: set off under Section 109 first, then carry forward under Section 110 for up to eight tax years against house property income only.
  7. Do MCQs on the caps, time limits and conditions, and note each trap you fall into.

Common mistakes in Income from House Property

  • Applying the interest cap of ₹2,00,000 without checking the conditions.

    Fix: Check both conditions each time: completion within five years from the end of the tax year of borrowing, and the certificate. If either fails, use ₹30,000.

  • Deducting 30% on the wrong base.

    Fix: Always deduct 30% of the annual value determined under section 21, before any interest.

  • Deducting all pre-construction interest in one year.

    Fix: Divide the prior-period interest into five equal instalments, starting with the tax year of acquisition or construction and the four years after.

  • Forgetting the 30% deduction on arrears and unrealised rent.

    Fix: Under Section 23, take the amount received and deduct 30% of it, and tax it in the year of receipt.

  • Carrying forward a house property loss against other heads.

    Fix: Remember that the carried-forward loss is set off only against house property income, for up to eight tax years.

  • Writing only the final answer in the computation.

    Fix: Show each step in order, since written answers earn marks for each step.

Last-day revision: Income from House Property

  • Deduction under Section 22(1)(a) is 30% of the annual value determined under section 21.
  • Interest on borrowed capital is deductible under Section 22(1)(b) when the property is acquired, constructed, repaired, renewed or reconstructed with that capital.
  • Interest for the period before the tax year of acquisition or construction is deducted in five equal instalments, starting with the year of acquisition or construction.
  • For properties under section 21(6), interest deduction is capped at ₹2,00,000 if construction or acquisition is completed within five years from the end of the tax year of borrowing and the lender's certificate is furnished.
  • In any other case under section 21(6), the interest cap is ₹30,000.
  • The total interest deduction under section 22(2) for properties under section 21(6) cannot exceed ₹2,00,000.
  • Interest payable outside India is not allowed if tax was not paid or deducted and there is no agent in India.
  • Arrears of rent or unrealised rent received later is taxed in the year of receipt, with a 30% deduction under Section 23.
  • Arrears are taxed whether or not the assessee still owns the property in that year.
  • House property loss that cannot be set off under section 109 is carried forward under Section 110.
  • The carried-forward loss is set off only against house property income and for at most eight succeeding tax years.
  • Use the term tax year, never assessment year.

Income from House Property practice questions

Income from House Property in other exams

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

Income from House Property: frequently asked questions

Is the 30% deduction available on actual rent or annual value?

It is 30% of the annual value as determined under section 21. It is not calculated on the net figure after interest. Take it first, then deduct interest.

How long can a house property loss be carried forward?

Under Section 110, it can be carried forward for no more than eight tax years immediately after the tax year in which the loss was first computed. In those years, it can be set off only against income from house property.

What is the interest limit for a self-occupied property?

For properties under section 21(6), the deduction under section 22(2) is capped at ₹2,00,000 if the acquisition or construction conditions and the lender's certificate are met. In any other case, the cap is ₹30,000.

Are MCQs on this chapter negative marked?

No. The ICMAI papers do not provide for negative marking, so attempt every MCQ in Section A. Each is worth 2 marks.