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. What I am unsure about is the procedure — where the application goes, what it costs, and how long income from house property matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to income from house property here is Income-tax Act, 1961, Section 22, Income-tax Act, 1961, Section 24 and Income-tax Act, 2025. The detail below matters, because Income-tax Act, 1961, Section 22 draws the line differently depending on what your documents show.

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.

Practical steps: 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 — remedies under Income-tax Act, 1961, Section 22 carry limitation periods, and unexplained delay 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 tax law.