CS Executive · Tax Laws and Practice
Income under the Head House Property for CS Executive
Income from house property is the tax-year income of a building or land attached to it, taxed in the hands of its owner or deemed owner. You solve it in order: check the charge, find annual value, subtract municipal tax, apply the statutory deductions and interest, then handle any loss under sections 108 to 111.
What this chapter covers
This chapter covers one head of income under the Income-tax Act, 2025. It asks who is taxed on a building, how its annual value is fixed, which deductions are allowed, and what happens when the result is a loss. The order of the topics matches the order of a computation question.
The chapter is mostly rule-based, with short numerical steps. A typical answer states the provision, works the figures, and ends with a clear income or loss figure. Interest on borrowed capital and the loss rules are where the chapter gets technical.
It connects to the rest of Paper 7 Part I in several ways. The result feeds into gross total income. The set off rules in sections 108 and 109 link it to salary, business and capital gains. Computation questions often combine house property with other heads, so you need this chapter to be automatic.
House property is a short, scoring chapter in the Direct Tax part of Paper 7. The method is the same every time, so a student who practises it can earn full marks on the computation. It also appears inside bigger questions on total income, so errors here spoil other answers. Since the paper is written, you get marks for the correct provision and the steps as well as the final figure.
Income under the Head House Property: topics in the order to study them
- 1Charge of Income from House PropertyStart here to learn what is taxed, who is taxed and when the head applies, since every later step depends on it.
- 2Deemed Ownership and Exempt IncomesNext, learn who is treated as owner and which incomes are left out, so you know whose income you are computing.
- 3Annual Value and Types of PropertyAnnual value is the starting figure of every computation, and it differs by type of property, such as let out, self-occupied or vacant.
- 4Deductions from House Property IncomeOnce you have annual value, you need the deductions allowed from it, including municipal taxes, the standard deduction and interest on borrowed capital.
- 5Computation of Income from House PropertyNow put annual value and deductions together and practise full problems, including part-year and mixed-use cases.
- 6Loss from House Property: Set Off and Carry ForwardStudy this last because it applies only when the computation gives a loss, and it needs the computation done correctly first.
How to prepare Income under the Head House Property
Treat this chapter as a method you repeat, not a list to memorise. Learn the sequence first, then the exceptions.
- Read the charge and deemed ownership rules and write one line on who is taxed in each situation.
- Learn the computation layout: annual value, less municipal taxes paid, net annual value, less deductions, income. Write it out from memory until it is automatic.
- Take each type of property in turn (let out, self-occupied, deemed let out, partly let) and solve at least two problems for each.
- Practise interest on borrowed capital separately, including pre-construction interest, because this is where numbers go wrong.
- Learn the loss rules as a short table in your notes: set off against other heads is limited to ₹2,00,000 under section 109(1)(b), carry forward is against house property income only, for up to eight tax years under section 110.
- Finish with mixed questions where a house property loss meets salary or business income, and write each answer in the provision, working, conclusion format.
Common mistakes in Income under the Head House Property
Taxing the wrong person as owner
Fix: Spend the first line of every answer stating who is the owner or deemed owner and why.
Deducting municipal taxes that were not paid in the year
Fix: Deduct only municipal taxes the question says were paid by the owner during the year.
Setting off the whole house property loss against salary or business income
Fix: Restrict the set off against other heads to ₹2,00,000 under section 109(1)(b) and carry forward the rest.
Carrying forward house property loss against other heads
Fix: Remember that carried forward house property loss is set off only against house property income, as section 110(1) says.
Mixing up carry forward periods across losses
Fix: Keep a small table: house property, business and capital loss are eight years; speculation loss is four years.
Giving only a number with no provision or conclusion
Fix: Name the rule, show the working, and close with a one-line conclusion on the income or loss.
Last-day revision: Income under the Head House Property
- Income from house property is taxed on the owner or deemed owner, so confirm who that is first.
- Start every computation with annual value, then deduct municipal taxes actually paid to get net annual value.
- Set off of house property loss against any other head is limited to ₹2,00,000 for the tax year (section 109(1)(b)).
- Under section 108, a loss from one house is first set off against income from another house in the same head.
- Unabsorbed house property loss is carried forward to the following tax year and set off only against house property income (section 110(1)).
- House property loss can be carried forward for no more than eight tax years after the year it was first computed (section 110(2)).
- Business loss cannot be set off against salary income (section 109(1)(a)).
- Capital gains loss cannot be set off against any other head (section 109(2)).
- Business loss carry forward is also capped at eight tax years (section 112(2)); speculation loss is capped at four (section 113(3)).
- Write the provision, show working in steps, and end with a clear income or loss figure.
Income under the Head House Property practice questions
- Ms. Anita Rao owns a flat in Chennai and earns rent from letting it out. Under the Income-tax Act, 2025, under which head is this rent charg…
- Mrs. Iyer sold her let-out flat in an earlier tax year. In the current tax year she receives Rs. 1,00,000 as arrears of rent for that flat f…
- Meera, the owner of a residential house, lets out part of it to a tenant. Under the Income-tax Act, 2025, under which head is this letting i…
- Mr. Raman owns a flat in Pune and lives in it himself throughout the tax year. He has no other house. What is the annual value of this flat …
- Under the Income-tax Act, 2025, which of the following is the correct statement about income from letting out a residential house by its own…
- Arjun owns two self-occupied houses in Delhi, both with nil annual value. House A has interest of Rs. 1,60,000 on a loan taken to acquire it…
- Under section 22 of the Income-tax Act, 2025, which statement about deductions in computing Income from house property is correct?
- Ravi owns a building, part of which he occupies for running his own consultancy, the profits of which are chargeable to tax. Under the Incom…
Income under the Head 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 under the Head House Property: frequently asked questions
How much house property loss can I set off against other income?
For any tax year, loss under the head Income from house property can be set off against income under any other head only to the extent of ₹2,00,000. This comes from section 109(1)(b) of the Income-tax Act, 2025. The balance is carried forward.
Can house property loss be carried forward?
Yes. Under section 110, the loss that could not be set off is carried forward to the following tax year. It is set off only against income from house property. It can be carried forward for no more than eight tax years after the year it was first computed.
Which Act should I study for house property in the June 2027 session?
From the June 2027 session, Paper 7 examines the Income-tax Act, 2025 as amended by the Finance Act, 2026, for tax year 2026-27. Do not use section numbers from the Income-tax Act, 1961 in your answers.
Can a capital loss be set off against house property income?
No. Section 109(2) says that the loss under the head Capital gains shall not be set off against income under any other head. It can be set off only against capital gains as per sections 108 and 111.