How is income from a let-out house property taxed

Question

I have rented out my second flat and I want to know how the rental income is taxed and what deductions I can claim against it. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

How is income from a let-out house property taxed is governed in India primarily by Income-tax Act, 1961, Section 22, Income-tax Act, 1961, Section 24 and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 22 of the Income-tax Act, 1961 charges tax on the annual value of a house property, which for a let-out property is generally the higher of the actual rent received and the fair rent or municipal value, subject to the standard rent under rent control laws where applicable, and this is computed under the head income from house property rather than as ordinary income.

Section 24(a) allows a flat standard deduction of thirty percent of the net annual value to cover repairs and maintenance, irrespective of the actual expenditure incurred, and this deduction is available regardless of whether you actually spent that amount, which makes it a valuable statutory allowance.

Section 24(b) allows deduction of interest paid on a home loan taken for the property, with no upper limit for a let-out property, unlike the capped deduction available for a self-occupied property, though this benefit is available only under the old tax regime and not under the default new regime under Section 115BAC.

If the total interest deduction results in a loss under the head house property, Section 71 allows set-off of up to a specified amount of this loss against income from other heads such as salary in the same year, with any remaining loss carried forward under Section 71B for up to eight assessment years to be set off only against future house property income.

What to do next: 1) Determine the annual value based on actual rent and municipal valuation; 2) Claim thirty percent standard deduction and full home loan interest deduction; 3) Set off any resulting loss against other income within the permitted limit; 4) Carry forward unabsorbed loss for up to eight years if applicable.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 22 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.