Tag: House property loss

Home Loan Interest Deduction: Section 22 Rules, Limits and How to Claim (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 08 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Interest on a loan taken to buy, build, repair or renew a house is deductible under section 22(1)(b) of the Income-tax Act, 2025 (earlier section 24(b)); on a let-out house the whole interest is allowed.
  • For a self-occupied house the limit is ₹2,00,000 a year if the house is completed within five years from the end of the tax year in which the loan was taken and the lender gives a certificate; otherwise it is ₹30,000.
  • Interest paid before the year of completion (pre-construction interest) is claimed in five equal instalments from the year of completion, inside the same cap.
  • Under the new regime, interest on a self-occupied house is not allowed, but interest on a let-out house is.

For most people, interest on a home loan is the biggest tax deduction they have. Under the Income-tax Act, 2025 the rule sits in section 22 (it was section 24(b) in the 1961 Act). This post covers who can claim how much, how pre-construction interest works, and what to give your employer and put in your return.

What qualifies

Under section 22(1)(b), interest payable on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing a property is deducted from the property’s annual value. The deduction is for interest payable, whether or not you have paid it. Interest payable outside India is not allowed if tax has not been paid or deducted on it and there is no agent in India (section 22(6)).

Principal repayment is not part of this deduction. It is a separate old regime deduction (see our post on home loan tax benefits).

The limits

Property Limit on interest in a year
Let-out house No limit; the whole interest payable
Self-occupied house (section 21(6)), acquired or constructed with a loan and completed within five years from the end of the tax year in which the loan was taken, with the lender’s certificate ₹2,00,000
Self-occupied house in any other case (for example, delayed completion, or a loan for repairs, renewal or reconstruction) ₹30,000
Total for all self-occupied houses ₹2,00,000 (section 22(5))

The five years: count from the end of the tax year in which you borrowed. A loan taken on 30/04/2026 falls in tax year 2026-27, which ends on 31/03/2027, so the house must be completed by 31/03/2032. Some articles count only four years, so check your own dates.

Certificate: to claim ₹2,00,000 you must furnish a certificate from the lender (section 22(2)(a)(ii)). It must show the interest payable on the capital borrowed and the interest on any new loan taken to repay the whole or part of the original loan (section 22(4)).

Pre-construction interest

While the house is under construction you cannot claim the interest. Interest payable for the period before the tax year in which the property is acquired or completed is claimed later (section 22(1)(c)):

  • in five equal instalments, one in the tax year of acquisition or completion and one in each of the next four tax years;
  • after reducing it by any amount already allowed under another provision of the Act (section 22(3)).

For a self-occupied house, the interest under clauses (b) and (c) together is subject to the ₹2,00,000 cap (section 22(2), as amended by the Finance Act, 2026).

Example. You take a loan to build a house you will let out. The interest payable is ₹90,000 in the first year and ₹1,20,000 in the second year. The house is completed in the third year, when the interest is ₹1,20,000.

  • Pre-construction interest: 90,000 + 1,20,000 = ₹2,10,000, so ₹42,000 a year for five years.
  • Deduction in the third year: 1,20,000 + 42,000 = ₹1,62,000.
  • In the fourth to seventh years: the interest of that year plus ₹42,000.

If the house is self-occupied and the interest of the year is ₹2,10,000, plus ₹42,000 of pre-construction interest, the total of ₹2,52,000 is capped at ₹2,00,000.

Let-out house: no limit, but a loss may arise

On a let-out house the whole interest is deducted after the 30% deduction. If the interest is large, the result is a loss from house property. In the old regime up to ₹2,00,000 of that loss can be set off against income such as salary; the rest carries forward for eight years against house property income. In the new regime the loss cannot be set off against other heads and is not carried forward (sections 109, 110 and 202). See our post on income from house property.

Old and new regime

Point Old regime New regime
Self-occupied house, interest under section 22(1)(b) Up to ₹2,00,000 Not allowed (section 202(2)(a)(v))
Let-out house Whole interest Whole interest
Loss set off against other heads Up to ₹2,00,000 Not allowed
Pre-construction instalment on a self-occupied house Allowed, within the ₹2,00,000 cap Unclear; see below

Section 202(2)(a)(v) names only section 22(1)(b), not the pre-construction clause 22(1)(c). The prudent position is that the self-occupied interest claim is closed in the new regime, but the text does not say so for clause (c). Take advice before claiming pre-construction interest on a self-occupied house in the new regime.

Joint loans and co-owners

Co-owners with definite shares are taxed separately on their own shares of the property, and the relief for a self-occupied house is available to each of them individually (section 24). So each co-owner who is also a borrower and pays interest can claim up to ₹2,00,000 on his or her share, which can give a larger total deduction than a single owner would get. You must be an owner, and the interest you claim should be what you are liable to pay.

How to claim

  1. Get the lender’s interest certificate for the year, showing interest and principal, the loan sanction details and each borrower.
  2. Tell your employer. Give Form 124 with the lender’s name, address and PAN (Rule 205) so TDS is calculated correctly. The employer may reduce TDS only for a loss from house property (section 392(4)(b)), not for other claims.
  3. Keep the possession or completion certificate, to show the date the house was acquired or completed.
  4. Report in the return: in the house property schedule, enter the property details, rent if any, taxes paid, 30% deduction and interest. Enter the pre-construction instalment together with the interest of the year.

Frequently asked questions

How much home loan interest can I claim?

On a let-out house, all the interest payable in the year. On a self-occupied house, up to ₹2,00,000 in a year if the house is acquired or constructed with borrowed capital and completed within five years from the end of the tax year in which the loan was taken, and you hold the lender’s certificate; in any other case, ₹30,000.

When does the five year period start?

From the end of the tax year in which the loan was taken. For a loan taken on 30/04/2026 (tax year 2026-27), the house must be completed by 31/03/2032.

What is pre-construction interest?

Interest payable for the period before the tax year in which the house was acquired or completed. It is claimed in five equal instalments, one in the tax year of completion and one in each of the next four years (section 22(1)(c)).

Is the pre-construction interest over and above the ₹2,00,000?

No. For a self-occupied house the total of the current interest and the pre-construction instalment in a year is capped at ₹2,00,000 (section 22(2), as amended by the Finance Act, 2026).

Can I claim interest on a self-occupied house in the new regime?

No. Section 202(2) disallows the section 22(1)(b) interest on houses covered by section 21(6) in the new regime. Interest on a let-out house is allowed.

What if the loan is refinanced?

Interest on a new loan taken to repay the earlier loan is also deductible, and the lender’s certificate should show it separately (section 22(4)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Income From House Property: How It Is Computed and Taxed (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 23 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Income from house property is the annual value of a building and its appurtenant land owned by you, less municipal taxes paid, a 30% standard deduction and interest on borrowed capital (sections 20 to 22 of the Income-tax Act, 2025).
  • The annual value is the higher of the rent the property could reasonably fetch and the actual rent; for up to two self-occupied houses it is nil.
  • A loss from house property can be set off against other income only up to ₹2,00,000 (old regime); the excess carries forward for 8 tax years against house property income. The new regime allows no set-off against other heads and no carry forward.
  • Co-owners with definite shares are taxed separately on their shares, and a person who is a deemed owner under section 25 is taxed as owner.

Rent from a house, flat, shop or office that you own is taxed under the head “Income from house property”. The head also applies to a house you live in, where the tax is nil but the home loan interest matters. From 01/04/2026 the rules are in sections 20 to 25 of the Income-tax Act, 2025 (they were sections 22 to 27 of the 1961 Act).

What is taxed under this head

  • Section 20(1): the annual value of property consisting of any building or land appurtenant to it (parking, garden or courtyard), owned by you.
  • Section 20(2): the head does not apply to the part of the property you occupy for your own business or profession, whose profits are taxed as business income.
  • Rent from a building, as such, is taxed here even if the tenant is a business. If the letting is itself your business, the income may be business income (see our post on house property income and business income).

Who is the “owner”

You are taxed as owner if you are the legal owner, or are treated as owner under section 25:

  • an individual who transfers a property to his or her spouse (other than under an agreement to live apart) or to a minor child (other than a married daughter) without adequate consideration;
  • the holder of an impartible estate;
  • a member of a co-operative society, company or association to whom a building is allotted or leased under a house building scheme;
  • a person allowed to take or retain possession in part performance of a contract (section 53A of the Transfer of Property Act, 1882);
  • a person who acquires rights in a building by sale, exchange or a lease of 12 years or more (month to month leases and leases up to one year are excluded).

Co-owners: where shares are definite and ascertainable, each co-owner is taxed on his or her own share and they are not an association of persons. The relief for self-occupied houses is available to each co-owner separately (section 24).

How income is computed

Step Rule
1. Annual value The higher of (a) the sum for which the property might reasonably be expected to let from year to year and (b) the actual rent received or receivable (section 21(1))
2. Adjust for vacancy If the property was let but vacant for part of the year and the actual rent is lower because of the vacancy, the annual value is the actual rent received or receivable (section 21(2))
3. Unrealised rent Rent that cannot be realised is left out, if the conditions in Rule 21 are met (below)
4. Less: local taxes Taxes levied by a local authority and actually paid by the owner during the tax year, whenever they fell due (section 21(3)). Taxes paid by a tenant are not deducted
5. Less: 30% of annual value Section 22(1)(a), whether or not you spent anything on repairs
6. Less: interest Interest on money borrowed to acquire, construct, repair, renew or reconstruct the property (section 22(1)(b)); see our post on home loan interest
Income from house property The balance, which can be a loss

The older provisions listed municipal value, fair rent and standard rent. Section 21 now speaks only of the sum the property can reasonably be expected to fetch. Municipal valuation and comparable local rents remain sensible evidence of that sum.

Unrealised rent (Rule 21)

Rent not paid by a tenant is left out when it is proved lost and irrecoverable, and:

  1. the tenancy is bona fide;
  2. the defaulting tenant has vacated, or steps have been taken to make him vacate;
  3. the tenant is not in occupation of any other property of yours; and
  4. you have taken all reasonable steps to sue for the rent, or satisfy the Assessing Officer that legal proceedings would be futile.

If you recover that rent later, it is taxed in the year you receive it, with a deduction of 30% (section 23).

Houses held as stock-in-trade

A builder’s unsold house that is not let at any time in the year has an annual value of nil up to two years from the end of the financial year in which the completion certificate is obtained (section 21(5), as amended by the Finance Act, 2026).

Self-occupied houses

The annual value of a house you occupy as your residence, or cannot occupy for any reason, is nil, but only for two houses that you specify (section 21(6) and (7)). It does not apply if the house is let at any time in the year or you get any other benefit from it. Any other house is taxed on its annual value even if it is vacant. Our post on deemed let-out property covers this.

With a nil annual value there is no 30% deduction. The only deduction is home loan interest, within the limits in section 22(2), and that creates a loss.

Examples

1. Let-out house. Rent ₹35,000 a month, so ₹4,20,000 a year. The reasonable rent is ₹3,90,000, municipal tax paid ₹12,000, loan interest ₹1,00,000.

  • Annual value: higher of 3,90,000 and 4,20,000 = ₹4,20,000
  • Less taxes paid: ₹12,000 = ₹4,08,000
  • Less 30%: ₹1,22,400
  • Less interest: ₹1,00,000
  • Income from house property = ₹1,85,600

2. Vacancy. A flat could fetch ₹40,000 a month (₹4,80,000 a year) but was vacant for two months, so rent received is ₹4,00,000. Because the actual rent is lower owing to vacancy, the annual value is ₹4,00,000.

3. Loss from a let-out house. Annual value less taxes ₹4,08,000, 30% deduction ₹1,22,400, interest ₹5,50,000. The result is a loss of ₹2,64,400.

  • Old regime: ₹2,00,000 is set off against other income, such as salary; the balance of ₹64,400 carries forward for up to eight tax years against house property income only.
  • New regime: the loss cannot be set off against any other head and it is not carried forward.

Arrears of rent

Arrears of rent received from a tenant, or unrealised rent realised later, are income from house property in the year of receipt, whether or not you still own the property, with a deduction of 30% (section 23).

House property loss: set-off and carry forward

Point Old regime New regime
Set-off against other house property income in the same year Yes Yes
Set-off against other heads Up to ₹2,00,000 (section 109(1)(b)) Not allowed (section 202(2)(b)(ii))
Carry forward of the balance Eight tax years, against house property income only (section 110) Not allowed (section 202(3))

Old and new section numbers

Topic 1961 Act 2025 Act
What is taxed Section 22 Section 20
Annual value Section 23 Section 21
Self-occupied houses Section 23(2) and (4) Section 21(6) and (7)
30% deduction and interest Section 24 Section 22
Arrears of rent Section 25A Section 23
Co-owners Section 26 Section 24
Deemed owner Section 27 Section 25
Set-off of loss Section 71 Section 109
Carry forward of loss Section 71B Section 110

The 1961 Act applies up to tax year 2025-26 (income of FY 2025-26); the 2025 Act applies from 01/04/2026.

Where to report it

Income from house property is reported in the house property schedule of the return. Give the address, whether the house is self-occupied, let out or otherwise, the co-owners and their shares, the rent, the taxes paid and the interest. Return forms with more than one house property, or with a loss to carry forward, need the fuller forms and not the simplest one. Check which form fits before you file.

Frequently asked questions

Which income is taxed under the head income from house property?

The annual value of any building or land appurtenant to it that you own (section 20). Property you occupy for your own business or profession is excluded, because its profits are taxed as business income.

How is annual value decided?

It is the higher of the sum for which the property could reasonably be expected to let from year to year and the actual rent received or receivable (section 21(1)). If it was let but stood vacant and the actual rent is lower because of the vacancy, the annual value is the rent actually received or receivable (section 21(2)).

What deductions are allowed?

Municipal and similar local taxes actually paid by the owner in the year, then 30% of the annual value and interest on borrowed capital (section 22). Nothing else, such as repairs or insurance, is allowed separately.

Can I have two self-occupied houses?

Yes. The annual value of up to two houses that you specify and occupy, or cannot occupy for any reason, is nil (section 21(6) and (7)). Any other house is taxed on its annual value even if it is vacant.

How much house property loss can I set off?

Under the old regime, up to ₹2,00,000 against income under other heads (section 109(1)(b)); any balance carries forward for eight tax years against house property income only (section 110). Under the new regime the loss cannot be set off against other heads and is not carried forward.

Who is taxed when a property is co-owned?

Each co-owner with a definite and ascertainable share, on that share. They are not taxed as an association of persons (section 24).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.