Income from House Property: Let-Out, Self-Occupied and the Interest Deduction
Akash Kore
· Founder & Product Architect· 3 min read
House property income has an unusual feature: the deduction for maintenance is a flat thirty per cent whether you spent anything or not. The interest deduction is where the planning sits, and the rules differ sharply between a property you live in and one you let.
- ✓Thirty per cent standard deduction on net annual value, regardless of actual expenditure.
- ✓Interest on a self-occupied property is capped at ₹2,00,000 in the old regime.
- ✓Interest on a let-out property is uncapped, but loss set-off is limited to ₹2,00,000 a year.
- ✓The new regime allows interest only on a let-out property.
The computation
Start with gross annual value — the higher of expected rent and actual rent received, for a let-out property, and nil for a self-occupied one. Deduct municipal taxes actually paid to get net annual value.
From that, deduct thirty per cent as a standard deduction under Section 24(a), and interest on borrowed capital under Section 24(b). The thirty per cent is flat: you cannot claim more by spending more, and you do not lose it by spending nothing.
Self-occupied property
Annual value is nil, so there is no income. Interest is deductible up to two lakh rupees in the old regime, provided the loan was taken for acquisition or construction and the construction completed within five years of the end of the financial year in which the loan was taken.
If the completion condition is not met, the cap falls to thirty thousand rupees. Up to two properties may be treated as self-occupied.
Let-out property
Interest is deductible without limit. However, Section 71(3A) restricts the set-off of loss from house property against other heads to two lakh rupees in any year, with the balance carried forward for eight years to be set off against house property income.
So the deduction is uncapped but the immediate benefit is not, which matters for highly leveraged rental property.
The new regime
Interest on a self-occupied property is not deductible at all in the new regime. Interest on a let-out property remains deductible, but the loss cannot be set off against other heads — it may only be carried forward.
For a taxpayer with a large home loan on a self-occupied property, this single difference frequently decides the regime question.
Frequently asked questions
### Can I claim home loan interest in the new regime?
Only on a let-out property. Interest on a self-occupied property is not deductible under the new regime, which is often the largest single reason a borrower stays with the old one.
### Is the 30 per cent standard deduction in addition to actual repairs?
It is instead of them. Section 24(a) allows a flat thirty per cent of net annual value regardless of what you actually spent, and you cannot claim actual repair costs separately.
### How much house property loss can I set off?
Up to two lakh rupees against other heads in any year, under Section 71(3A). The balance is carried forward for eight assessment years and can be set off only against income from house property.
Related Dyopact Tools & Templates
Frequently Asked Questions
Can I claim home loan interest in the new regime?
Only on a let-out property. Interest on a self-occupied property is not deductible under the new regime, which is often the largest single reason a borrower stays with the old one.
Is the 30 per cent standard deduction in addition to actual repairs?
It is instead of them. Section 24(a) allows a flat thirty per cent of net annual value regardless of what you actually spent, and you cannot claim actual repair costs separately.
How much house property loss can I set off?
Up to two lakh rupees against other heads in any year, under Section 71(3A). The balance is carried forward for eight assessment years and can be set off only against income from house property.
Akash Kore
Founder & Product ArchitectArchitecting business document operating systems and automated billing workflows for Indian SMBs, agencies, and enterprises.