Income Tax Law / House Property

Section 22 of the Income-tax Act, 1961: Income from House Property

Section 22 identifies when the annual value of a building and its adjoining land is taxable under the head "Income from house property". The provision generally taxes the owner based on annual value, not merely on the rent actually received.

What is Section 22?

Section 22 of the Income-tax Act, 1961 charges to tax the annual value of property consisting of buildings or lands appurtenant thereto where the assessee is the owner. A portion occupied by the owner for a business or profession carried on by that person, the profits of which are chargeable to income tax, is excluded from this head.

The charge is on the property's annual value as computed under the Act. Actual rent is relevant for let-out property, but it is not the sole determinant of taxability. Sections 23 and 24 govern valuation and deductions.

Conditions for taxation under Section 22

1. Building or adjoining land: The asset must be a building, or land appurtenant to a building, such as a related courtyard, garage or compound.
2. Ownership: The taxpayer must be the owner, including certain deemed owners under Section 27.
3. No own-business exception: The relevant portion must not be occupied for the taxpayer's own taxable business or profession.

Vacant land by itself is generally not taxed under Section 22; its income may fall under another head depending on the circumstances. The classification of commercial premises, residential houses and other buildings depends on the nature of the property and transaction, not simply its label.

Who is treated as the owner?

The legal owner is ordinarily chargeable under Section 22. Section 27 also treats certain persons as deemed owners for this purpose, including specified transfers to a spouse or minor child without adequate consideration, certain members of co-operative societies, persons in possession under qualifying part-performance arrangements, and certain long-term rights in buildings, subject to the exact statutory conditions.

Under Section 26, co-owners with definite and ascertainable shares are generally assessed separately on their respective shares rather than as an association of persons for the property.

Section 23: How annual value is determined

Let-out property

Broadly, the annual value considers the reasonable expected rent, actual rent received or receivable, vacancy-related relief where applicable, and municipal taxes borne and actually paid by the owner, subject to Section 23. Unrealised rent is treated according to prescribed conditions. The resulting amount is commonly described as net annual value.

Self-occupied property

For the periods and conditions specified in Section 23(2) and 23(4), the annual value of up to two eligible self-occupied houses can be taken as nil. The Finance Act, 2025 clarified the treatment of property that the owner cannot actually occupy for any reason, subject to the relevant statutory provisions. Other houses may be subject to deemed annual value rules.

Business use and stock-in-trade

Property occupied by the owner for the owner's taxable business or profession falls outside the Section 22 charge for that portion. Special annual-value provisions may apply to certain properties held as stock-in-trade; consult Section 23(5) for the relevant period.

Section 24: Deductions from house property income

After computing net annual value, Section 24(a) generally permits a standard deduction of 30% of net annual value. Section 24(b) addresses eligible interest on borrowed capital, with separate conditions and limits for self-occupied and let-out properties.

For qualifying self-occupied property under the 1961 Act, the commonly applicable interest ceiling is Rs. 2,00,000, subject to acquisition/construction conditions, dates and certificates; in other cases a lower Rs. 30,000 ceiling may apply. For let-out property, eligible interest is generally deductible in computing house property income, but set-off and carry-forward of resulting losses are governed separately by Sections 71 and 71B. Under the concessional regime in Section 115BAC, additional restrictions apply, including on self-occupied-property interest deductions and loss set-off.

See the related articles on Section 24 deductions and Section 25 restrictions.

Practical examples

Example 1: Let-out residential flat

Assume gross annual value is Rs. 3,60,000 and eligible municipal taxes paid by the owner are Rs. 20,000. Net annual value is Rs. 3,40,000. The 30% deduction under Section 24(a) is Rs. 1,02,000, leaving Rs. 2,38,000 before any eligible interest deduction. This simplified illustration assumes no vacancy or unrealised-rent adjustment.

Example 2: Owner uses premises for a business

A shop owned and occupied by a trader for the trader's taxable business is generally excluded from Section 22 for that portion. Related business expenses are considered, where permissible, under the business-income provisions instead.

Example 3: Two qualifying self-occupied homes

Where statutory conditions are satisfied, annual value may be nil for up to two self-occupied properties under the relevant provisions. Interest deductions, if any, depend on the applicable regime and limits; nil annual value does not mean every related deduction is automatically available.

House property versus other heads of income

Rental income from ownership of a building normally falls under house property, but certain complex commercial exploitation arrangements may be assessed as business income depending on facts and applicable judicial principles. Receipts from bare land or from arrangements where the taxpayer is not an owner may fall under another head. Examine the agreements, ownership, services and business model.

Frequently asked questions

Is house property income taxable if no rent is received?

Potentially yes. Section 22 charges annual value, subject to the self-occupied, vacancy, stock-in-trade and other statutory rules.

Is a vacant plot taxed under Section 22?

A bare vacant plot without a building is ordinarily outside Section 22. Income from it may be taxable under another head.

Does Section 22 apply to commercial buildings?

Yes, if its ownership and other conditions are met, unless the relevant part is occupied for the owner's own taxable business or profession.

Can both co-owners report their shares separately?

Generally yes where their respective shares are definite and ascertainable, subject to Section 26.

Official legislation and guidance

• Income-tax Act, 1961 - Income Tax Department
• India Code - Central Acts and amendments
• Income Tax e-Filing portal
• Income Tax Department - rules and notifications

This guide is general information. Consult the statutory text, applicable tax-year rules and official notifications before relying on a specific treatment.