Self-occupied vs let-out vs deemed let-out. GAV - municipal taxes - 30% deduction - Section 24(b) interest. 2 self-occupied NIL. 3rd+ deemed let-out. Joint ownership doubles benefit.
INCOME FROM HOUSE PROPERTY (Sections 22-27): 3 CATEGORIES based on usage: (1) SELF-OCCUPIED: own residence. (a) GROSS ANNUAL VALUE (GAV) = NIL. (b) Only Section 24(b) home loan interest deduction (₹2L cap). (c) NO rental income. (2) LET-OUT: rented to tenant. (a) GAV = actual rent received. (b) Municipal taxes deducted. (c) 30% standard deduction. (d) Home loan interest (no cap). (3) DEEMED LET-OUT: 2nd+ property even if not rented. (a) GAV = expected market rent. (b) Same deductions as let-out.
RENTAL INCOME FORMULA: (1) GROSS ANNUAL VALUE (GAV): higher of actual rent OR municipal valuation OR fair rent. (2) Less: MUNICIPAL TAXES paid by owner. (3) = NET ANNUAL VALUE (NAV). (4) Less: STANDARD DEDUCTION 30% of NAV (Section 24(a)). (5) Less: HOME LOAN INTEREST (Section 24(b)) — no cap for let-out. (6) = INCOME FROM HOUSE PROPERTY. EXAMPLE: ₹50K monthly rent = ₹6L annual. (a) GAV ₹6L. (b) Municipal tax ₹30K. (c) NAV ₹5.7L. (d) 30% deduction ₹1.71L. (e) Home loan interest ₹3L. (f) Net taxable: ₹5.7L - ₹1.71L - ₹3L = ₹99K.
MULTIPLE PROPERTIES RULES: (1) UP TO 2 SELF-OCCUPIED properties: both can be NIL GAV (recent provision). (2) 3RD+ PROPERTY: treated as DEEMED LET-OUT. Expected rent taxable. (3) SOLE PROPERTY: usually self-occupied. (4) MIXED USE: portion self-occupied + portion let. (5) JOINT OWNERSHIP: income split per ownership share. STRATEGIC: 2 self-occupied tax-efficient. 3rd property: rent out to optimize tax. ALL 3+ properties owner: declare expected rent for deemed let-out (else notice + scrutiny).
SECTION 24(b) HOME LOAN INTEREST DEDUCTION: (1) SELF-OCCUPIED: ₹2L MAX cap annually. (2) LET-OUT/DEEMED LET-OUT: NO CAP — full interest deductible. (3) UNDER-CONSTRUCTION property: PRE-CONSTRUCTION interest deductible in 5 equal installments AFTER possession. (4) JOINT BORROWERS: each can claim separately within limits. (5) BOTH OLD + NEW REGIME (limited new regime — only let-out). EXAMPLE: ₹50L loan, ₹4L annual interest. (a) Self-occupied: ₹2L deduction (₹2L disallowed). (b) Let-out: ₹4L full deduction. MAJOR TAX SAVING for property investors.
PROPERTY INCOME STRATEGY: (1) SECOND SELF-OCCUPIED: NIL income but limited to ₹2L interest. (2) RENT OUT for higher interest deduction. (3) JOINT OWNERSHIP husband+wife: split rental income, dual deductions. (4) MUNICIPAL TAX DEDUCTION: receipts critical. (5) STANDARD DEDUCTION 30% AUTOMATIC: no documentation needed. (6) UNREALIZED RENT: deductible if reasonable steps for recovery. (7) VACANCY ALLOWANCE: pro-rata. (8) DEEMED LET-OUT 3rd+ property: pay tax on expected rent (else scrutiny). (9) NRI LANDLORD: TDS 30% by tenant on rent > ₹50K/month (Section 195). (10) MAINTAIN proper records: rent agreement, receipts, bank statements. CRITICAL for compliance + max deduction claim.