Tax Laws and Practice · Income under the Head House Property

Charge of Income from House Property under Section 20

Updated 11 October 2026 · Fact-checked

Under section 20 of the Income-tax Act, 2025, the annual value of any building or land appurtenant to it, owned by the assessee, is taxed under the head Income from house property. It is not taxed here for any portion the assessee uses for his own business or profession. Check property, ownership and use in that order.

Understand Charge of Income from House Property

Every income is taxed under one of the heads of income. Income from house property is the head for income from buildings and the land attached to them. Section 20 is the charging section for this head. If a question asks whether a receipt falls here, section 20 is where you start.

Section 20(1) says the annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee, is chargeable under this head. So three things matter: there must be a building (with any land appurtenant to it), the assessee must be its owner, and the charge is on the annual value of the property.

Note what the charge is on. It is on the annual value, not on the rent actually received. Rent is only one input in finding the annual value. How to find annual value is a separate topic. Here you only need to decide whether the head applies.

Land appurtenant means land that goes with the building, such as the compound, garden, parking area or courtyard. Vacant land that is not attached to a building is not covered by this head. It falls under another head, depending on how it is used.

Section 20(2) gives the exception. The charge does not apply to portions of the property that the assessee occupies for his business or profession, where the profits of that business or profession are chargeable to income-tax. Say a doctor runs her clinic from a floor of her own building. That floor is not taxed here, because its use is reflected in her professional income. The rest of the building still falls under house property.

Section 26(4) points the same way from the business side. Income from letting out a residential house or a part of it by the owner is not business income. It is chargeable only under the head Income from house property.

Key rules to remember

Basis of charge (section 20(1)): Building or land appurtenant thereto + owned by the assessee → annual value taxed under Income from house property; Both conditions must hold. The charge is on annual value, not simply on rent received.
Exclusion for own business or profession (section 20(2)): Portion occupied by the assessee for his business or profession, whose profits are chargeable to tax → not charged under this head; The exclusion applies only to the portion so occupied, and only where the profits are chargeable to income-tax.
Letting of residential house (section 26(4)): Income from letting out a residential house or part of it by the owner → only under Income from house property; It cannot be taxed as business income.
Set off of house property loss (section 109(1)(b)): House property loss set off against other heads ≤ ₹2,00,000; A link to the next topic, useful for context in a combined question.

How to solve Charge of Income from House Property questions

Use this order for any question asking whether an income is taxable under house property.

1Identify the property. Is it a building, or land appurtenant to a building? If it is vacant land with no building, stop. Section 20 does not apply.
2Identify the owner. Check whether the assessee is the owner of the property in the tax year.
3Check the use. Is any portion occupied by the assessee for his own business or profession, with profits chargeable to tax? If yes, exclude that portion under section 20(2).
4Check letting. If the owner lets a residential house or a part of it, the income is taxed only under this head, by section 26(4).
5State that the annual value of the remaining portion is chargeable under the head Income from house property.
6Write a clear conclusion that names the section, then move to computing annual value if the question asks for it.

Quickest way: Three-test check: property, owner, use

When to use it: Use it for short theory questions and for the first line of any house property problem.

Ask: building or land appurtenant? If no, it is not house property.
Ask: does the assessee own it? If no, check the deemed ownership rules before you conclude.
Ask: is it used by the assessee for his own business or profession? If yes, that portion is out of the head.
Whatever remains is taxed on annual value under section 20(1).

Common mistakes in Charge of Income from House Property

Taxing the rent actually received instead of the annual value.
Students assume rent and annual value are the same thing.
Fix: Write that the charge is on annual value under section 20(1). Rent is only one input in finding it.
Treating vacant land as house property.
The words 'building or land' are read without the words 'appurtenant thereto'.
Fix: Land is covered only when it is appurtenant to a building. Vacant land must be taxed under another head.
Taxing a shop or office used by the owner for his own business under house property.
Students see 'building owned' and stop reading.
Fix: Apply section 20(2). The portion the assessee occupies for his business or profession, whose profits are taxable, is excluded.
Taxing rent from a let-out residential house as business income.
Rent feels like a business receipt, especially if the owner lets many houses.
Fix: Quote section 26(4). Income from letting out a residential house or part of it by the owner is chargeable only under house property.
Excluding the whole building when only one portion is used for business.
Students read the exclusion as covering the whole property.
Fix: Section 20(2) excludes only the portion occupied for business or profession. The rest stays under this head.

Worked examples

Example 1

Mr. Rao owns a three-storey building in Pune. He runs his own chartered accountancy practice from the ground floor and lets out the first and second floors as residences. Discuss which portions are charged under the head Income from house property.

Show the solution

Provision: under section 20(1), the annual value of a building owned by the assessee is chargeable under Income from house property.
Ownership: Mr. Rao owns the whole building, so section 20(1) applies to it.
Own profession: the ground floor is occupied by him for his profession, and the profits of that profession are chargeable to tax. Under section 20(2), that portion is outside the head.
Let-out floors: the first and second floors are residential houses let out by the owner. Under section 26(4), this income is chargeable only under house property, not as business income.

Answer: Only the annual value of the first and second floors is chargeable under Income from house property. The ground floor is excluded by section 20(2), and its use is reflected in his professional income.

Example 2

Ms. Iyer owns a plot of vacant land in Chennai and a house with a garden attached to it. She lives in the house. Examine whether section 20 covers the vacant plot and the garden.

Show the solution

Provision: section 20(1) covers buildings and lands appurtenant thereto, owned by the assessee.
Garden: the garden is land attached to the house she owns. It is land appurtenant to the building, so it is part of the property under section 20(1).
Vacant plot: it has no building and is not appurtenant to one. It is not property covered by section 20(1).
Own house: she occupies it for residence, not for business or profession, so section 20(2) does not apply to it. Its annual value is still worked out under this head, using the computation rules.

Answer: The house and its garden fall under Income from house property under section 20(1). The vacant plot does not, and it must be taxed under the head that suits its use.

Exam tips

Begin every answer with the words of section 20(1): building or land appurtenant, owned by the assessee, annual value.
Always mention section 20(2) when facts show an owner using part of the property for his own business or profession.
In case-study questions, split the property into portions and give a one-line conclusion for each.
Use the Income-tax Act, 2025 section numbers, not those of the 1961 Act, except when contrasting.
End each answer with a clear conclusion that names the head of income.

Practice questions from Income under the Head House Property

Charge of 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.

Charge of Income from House Property: frequently asked questions

What is the basis of charge for income from house property?

Section 20(1) of the Income-tax Act, 2025 charges the annual value of buildings or lands appurtenant to them, owned by the assessee, under this head. Ownership and the nature of the property decide the charge. The rent actually received is not itself the charge.

Is house property income taxed if the owner uses the building for his own business?

Not for the portion he occupies for his business or profession, if the profits of that business or profession are chargeable to tax. Section 20(2) excludes that portion. Any other portion of the same building stays under house property.

Can rent from a residential house be taxed as business income?

No. Section 26(4) says income from letting out a residential house or a part of it by the owner is chargeable only under Income from house property. It is not included in business income.

Is vacant land taxed under house property?

No, unless the land is appurtenant to a building. Section 20(1) covers buildings and lands appurtenant to them. Vacant land with no building must be taxed under whichever head suits its use.