Income from House Property: How is it taxed?

House property
House property

Income Tax Act states that house property is any building owned by the taxpayer himself. This house property could be a flat, shop, office space, factory shed, commercial building, agricultural land, or a farmhouse.

Income from House Property

Any income in the form of rent from house properties is taxable. The following terms will help you in computing your income from house property:

  1. Fair market value or municipal value which is the value of the property decided by the Municipal corporation of the area, whichever is higher.
  1. Amount calculated above or Actual rent that can be received from the house properties, whichever is higher. 
  1. Gross Annual Value (GAV): If the house property was vacant for any part of the year, the rental income not received by taxpayer due to such vacancy shall be deducted from the amount calculated in the above-mentioned step. That’s how the taxpayer will get Gross Annual Value of the property.

GAV = Amount computed in the above step – Vacancy Loss.

In the case of self-occupied house properties, where there is no rental income received by the taxpayer, in such a case the Gross annual value of a self-occupied house properties will be zero.

  1. Net Annual Value (NAV): Net Annual Value of house property can be calculated as – Gross Annual Value of the house property minus municipal taxes paid during the year by the owner.

Points to remember:

  • Municipal taxes paid by the tenant will not be accepted.
  • If the owner fails to pay some municipal taxes in a financial year, then he/she cannot claim any deduction for that Financial year.
  • The taxpayer cannot claim any deduction for municipal taxes paid for self-occupied house property.
  • Gross Annual Value of a Self-occupied house properties is zero, and therefore the taxpayer cannot claim any deduction for municipal taxes and hence a Net Annual value of the house property is also zero. 
  1. Applicable Deductions: There are 2 deductions which are eligible to be deducted from Net Annual Value of the house properties and they are:
  1. Standard Deduction of NAV
  2. Interest on home loan
  1. Income from house properties = Net Annual Value – Applicable deduction.



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