Tax Laws and Practice · Income under the Head House Property

Deductions from House Property Income under Section 22

Updated 11 October 2026 · Fact-checked

Section 22 of the Income-tax Act, 2025 allows two deductions from house property income: 30% of the annual value after municipal taxes, and interest payable on borrowed capital, including pre-construction interest in five instalments. For a self-occupied house, interest is capped at ₹2,00,000 or ₹30,000, depending on conditions.

Understand Deductions from House Property Income

Income from house property is not taxed on the gross rent. Section 21 first fixes the annual value. Section 22 then allows deductions from it. This gives the income you finally tax.

There are two deductions. The first is the standard deduction: 30% of the annual value as determined under section 21. That annual value is already reduced by local-authority taxes (municipal taxes) actually paid by the owner during the tax year. So the 30% is worked out on the figure after municipal taxes. This is often called the net annual value. The 30% is a flat allowance. You cannot claim repairs, insurance or collection charges separately.

The second is interest on borrowed capital. It is allowed where the property was acquired, constructed, repaired, renewed or reconstructed with borrowed money. The Act says interest *payable*. So you claim it for the year whether or not you have paid it.

If you borrowed before the year in which the property was acquired or constructed, the interest for that earlier period is pre-construction interest. You cannot claim it all at once. You claim it in five equal instalments: in the year of acquisition or construction and in each of the next four tax years. Any amount already allowed under another provision of the Act is first removed before you split it.

For a self-occupied house, or one the owner cannot occupy, the annual value is nil. The 30% deduction is therefore nil. Only interest can be claimed, and it is capped. The cap is ₹2,00,000 if the loan conditions are met, otherwise ₹30,000. The result is a loss from house property.

Key rules to remember

Standard deduction: 30% × (Annual value − Municipal taxes paid by owner); Section 22(1)(a), with section 21(3). Applies to let property. For self-occupied property the annual value is nil, so this deduction is nil.
Income from let house property: Net annual value − 30% standard deduction − Interest on borrowed capital (current year interest + one-fifth of pre-construction interest); A negative result is a loss under this head.
Pre-construction interest: Total interest for the period before the year of acquisition or construction ÷ 5 per year; Section 22(1)(c). Claimed in the year of acquisition or construction and in each of the four following tax years. Reduce first by any amount already allowed under another provision (section 22(3)).
Cap for self-occupied property (conditions met): Interest under 22(1)(b) and (c) together ≤ ₹2,00,000; Section 22(2)(a). Needs (i) borrowing for acquisition or construction, completed within five years from the end of the tax year in which the capital was borrowed, and (ii) a certificate from the lender.
Cap for self-occupied property (other cases): Interest under 22(1)(b) and (c) together ≤ ₹30,000; Section 22(2)(b). Applies where the conditions for ₹2,00,000 are not met, for example loan for repair or renewal.
Overall cap across such properties: Total deduction for all properties under section 21(6) ≤ ₹2,00,000; Section 22(5). Applies if the owner has more than one such house.
Interest payable outside India: Not allowed if tax not paid or deducted and there is no agent in India; Section 22(6).

How to solve Deductions from House Property Income questions

Use the same order for every question. It keeps the 30% deduction and the interest cap from getting mixed up.

1Decide whether the house is let or self-occupied (or one the owner cannot occupy). This decides the annual value and which interest cap applies.
2For a let house, find the annual value under section 21: the higher of expected rent and actual rent, adjusted for vacancy as the Act provides.
3Deduct municipal taxes actually paid by the owner during the tax year. This gives the net annual value. Do not deduct taxes that were only due.
4Compute 30% of the net annual value. For a self-occupied house, write nil.
5Work out interest: current year interest on the borrowing plus one-fifth of the pre-construction interest, if the property was acquired or constructed this year or in the previous four years.
6For a self-occupied house, apply the cap: ₹2,00,000 if the conditions are met, otherwise ₹30,000. Check the lender's certificate and the five-year completion condition.
7Compute income: net annual value − 30% − allowed interest. Show a negative figure as a loss, and end with a one-line conclusion.
8Check that no interest has been claimed twice under another provision of the Act.

Quickest way: Four-line layout for house property deductions

When to use it: Use it in any numerical where the question gives rent, municipal taxes and loan interest. It saves time and shows the examiner each step.

Line 1: Annual value − municipal taxes paid = net annual value (nil if self-occupied).
Line 2: Less 30% of line 1.
Line 3: Less interest = current interest + pre-construction interest ÷ 5. Apply the ₹2,00,000 or ₹30,000 cap only for self-occupied property.
Line 4: Subtract lines 2 and 3 from line 1 to get income or loss. Add a note on the lender's certificate and the five-year condition if the question mentions a loan.

Common mistakes in Deductions from House Property Income

Calculating 30% on the gross annual value without deducting municipal taxes.
Students apply the percentage to the rent figure straight away.
Fix: First subtract municipal taxes actually paid by the owner, then take 30% of the balance.
Claiming 30% standard deduction for a self-occupied house.
Students treat the 30% as a general allowance on the house.
Fix: The annual value of a self-occupied house is nil, so 30% of nil is nil. Only interest, within the cap, is available.
Claiming the whole pre-construction interest in one year.
Students forget that it is spread over time.
Fix: Divide by five. Claim one-fifth in the year of acquisition or construction and in each of the next four tax years.
Applying the ₹2,00,000 limit separately to current interest and to pre-construction interest.
Students read clauses (b) and (c) as two separate claims.
Fix: For self-occupied property, the cap applies to both together under section 22(2). Add them, then apply the cap.
Allowing ₹2,00,000 without checking conditions.
Students remember the larger figure and skip the conditions.
Fix: Check that the loan was for acquisition or construction, that it was completed within five years from the end of the tax year of borrowing, and that a lender's certificate exists. Otherwise the cap is ₹30,000.
Claiming interest only when it has been paid.
Students think of deductions as cash-basis.
Fix: The section allows interest payable. Claim the year's interest even if unpaid, unless section 22(6) bars it for interest payable outside India.

Worked examples

Example 1

Rajesh owns a flat in Pune let out for the whole year. The sum for which it might reasonably be expected to let is ₹6,00,000 a year. Actual rent receivable is ₹55,000 a month. He paid municipal taxes of ₹40,000 during the tax year. Interest payable on a loan taken to buy the flat is ₹1,80,000 for the year. There is no pre-construction interest. Compute income from house property.

Show the solution

The flat is let and there is no vacancy. Annual value is the higher of ₹6,00,000 and actual rent of ₹55,000 × 12 = ₹6,60,000. So the annual value is ₹6,60,000.
Less municipal taxes paid by the owner: ₹40,000. Net annual value = ₹6,20,000.
Standard deduction under section 22(1)(a): 30% × ₹6,20,000 = ₹1,86,000.
Interest on borrowed capital under section 22(1)(b): ₹1,80,000. The ₹2,00,000 cap does not apply to a let property.
Income = ₹6,20,000 − ₹1,86,000 − ₹1,80,000 = ₹2,54,000.

Answer: Income from house property is ₹2,54,000.

Example 2

Meera borrowed ₹40,00,000 on 1 April 2023 to construct a house for her own residence. Construction was completed on 15 February 2027, within the tax year 2026-27, and she lives in it. Interest payable for the period up to 31 March 2026 is ₹3,00,000, none of which has been allowed under any other provision. Interest payable for the year 2026-27 is ₹1,10,000. She holds the lender's certificate. Compute her income from house property for the tax year 2026-27.

Show the solution

The house is self-occupied, so the annual value is nil. The 30% standard deduction is also nil.
Check the conditions for the ₹2,00,000 cap. The loan was for construction, and completion on 15 February 2027 is within five years from the end of the tax year of borrowing (31 March 2024, so the time runs to 31 March 2029). She has the certificate. So the cap is ₹2,00,000.
Pre-construction interest of ₹3,00,000 is claimed in five equal instalments: ₹3,00,000 ÷ 5 = ₹60,000 for 2026-27, and the same for each of the next four tax years.
Total interest for 2026-27 = ₹1,10,000 + ₹60,000 = ₹1,70,000.
Compare with the cap: ₹1,70,000 is below ₹2,00,000, so the full amount is allowed.
Income = nil − ₹1,70,000 = a loss of ₹1,70,000.

Answer: Loss from house property is ₹1,70,000. If the total interest had been ₹2,40,000, only ₹2,00,000 would be allowed. Had the conditions not been met, the cap would be ₹30,000.

Exam tips

Always show the order: annual value, municipal taxes, net annual value, 30%, interest. Marks go to each step even if one figure is wrong.
For loan questions, read the dates carefully. They decide the pre-construction period and the five-year completion condition.
State the section in your answer: section 22(1)(a) for the 30% deduction, 22(1)(b) and (c) for interest, 22(2) for the caps.
If more than one self-occupied house is given, remember that the total deduction under section 22(2) cannot exceed ₹2,00,000 as per section 22(5).
Be aware that section 131 gives a separate interest deduction of up to ₹1,50,000 for certain loans sanctioned between 1 April 2019 and 31 March 2022, with a stamp duty value limit of forty-five lakh rupees and the condition that the assessee owns no residential house on the date of sanction. It is not available to those eligible under section 130, and the same interest cannot be claimed twice.

Practice questions from Income under the Head House Property

Deductions from House Property Income in other exams

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

Deductions from House Property Income: frequently asked questions

Is the 30% deduction available on a self-occupied house?

No. The annual value of a self-occupied house is nil, so 30% of it is nil. You can claim only interest on borrowed capital, within the caps in section 22(2).

How is pre-construction interest claimed?

Add up the interest payable for the period before the tax year of acquisition or construction. Claim it in five equal instalments, starting with the year of acquisition or construction and then the four following tax years. Reduce it first by any amount already allowed under another provision.

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

It is ₹2,00,000 if the loan was taken for acquisition or construction, it is completed within five years from the end of the tax year of borrowing, and you hold the lender's certificate. In any other case it is ₹30,000. The cap covers current and pre-construction interest together.

Do municipal taxes get a separate deduction?

They are not part of section 22. They reduce the annual value under section 21(3), if the owner actually paid them during the tax year. The 30% deduction is then computed on the reduced figure.