What homeowners need to know about house property tax rules, explains tax advisor

India Today

28-07-2025

The way you're taxed on your house property income may soon change, especially if you plan to shift to the new income tax regime. A key benefit many taxpayers currently enjoy might no longer be available.Sujit Bangar, Founder, TaxBuddy.com shared a fact on LinkedIn, 'In FY23, 60 lakh taxpayers claimed Rs 77,808.7 crores of loss under house property head. With 95%-97% of taxpayers may opt for new tax regime, this benefit is going to go away.'
advertisementSo, what exactly does the new regime say about income from house property? Let's break it down in simple terms.TYPES OF HOUSE PROPERTY YOU'RE TAXED ON
Under income tax rules, house properties are classified into three types. A Self-Occupied Property (SOP) is one that you use for your own residence. You can have up to two such properties, and their taxable value is considered nil.If you rent out a property, it is categorised as Let-Out Property, and the rental income you earn from it is taxable.If you own more than two properties, any additional property is treated as "Deemed to be Let-Out", even if it's vacant. In such cases, tax is calculated based on notional rent."Self-Occupied Property (SOP): Used for own residence - Taxable value = NIL (max 2), Let-Out Property: Actually rented - Rental income is taxable, Deemed to be Let-Out: If you own >2 properties, max 2 considered as SOP and rest as deemed let out," Bangar said.HOW IS HOUSE PROPERTY INCOME CALCULATED?To calculate your taxable income from house property, there's a simple two-step process. First, you find the Net Annual Value (NAV), which is the rent you earn or could earn after subtracting municipal taxes.'A 30% of standard deduction of NAV and interest on property are allowed on the NAV. That's your taxable income u.t.h. house property,' he then added.Bangar further explains, 'Loss (due to interest on loan, majorly) is not allowed under house property head in the new regime, whereas, it is allowed under the old regime of up to 2 lakhs.'OLD REGIME VS NEW REGIMEUnder the old tax regime, you can set off losses from house property (like high interest on home loans) against other income, up to Rs 2 lakh and can claim deductions under Section 80C for repaying the home loan principal.However, under the new regime, these are not allowed.Bangar points out, 'While municipal taxes and standard deduction are allowed both under the new as well as the old regime, set-off of losses and Section 80C deductions are allowed only under the old regime.'RENT PAYMENTS AND TDS RULESIf you're paying rent of more than Rs 50,000 per month, you must deduct TDS at 2% under Section 194-IB of the Income Tax Act.advertisementThis rule applies even if you're an individual or a Hindu Undivided Family (HUF) not engaged in any business or profession. The best part is, you don't need a Tax Deduction Account Number (TAN) to do this. The TDS should be deducted in the last month of the tenancy or the financial year, whichever comes earlier, stated Bangar.JOINT HOME LOAN? HERE'S HOW YOU CAN SAVEIf you and your spouse or family member are co-owners and co-borrowers of a home loan, both of you can claim benefits, i.e, up to Rs 2 lakh each for interest under Section 24(b) and up to Rs 1.5 lakh each under Section 80C for the principalBanger adds, 'Must be co-owners & co-borrowers and pay EMIs for the property. These benefits are not available under the new regime.'WHAT SHOULD YOU DO?If you're a homeowner or planning to buy a house, it's important to understand these changes. While the new regime offers lower tax rates, it also takes away key deductions that help property owners reduce their taxable income.Choosing between the old and new tax regimes now depends not just on your salary, but also on how much you've invested in your home.- Ends
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