New IT Act 2025 — Knowledge Bank

Deductions from income from house property

Section 22 — Deductions from income from house property

Old Act equivalent: Section 24 of IT Act 1961 Sub-part: C.—Income from house property

Statutory Text

(1) The income under the head “Income from house property” shall be computed after making the following deductions:—

(a) 30% of the annual value as determined under section 21;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital;

(c) where the capital referred to in clause (b) is borrowed during any period prior to the tax year in which the property has been acquired or constructed, the amount of any interest payable for the said prior period in five equal instalments for the said tax year and for each of the four immediately succeeding tax years.

(2) In case of property or properties referred to in section 21(6), the aggregate amount of deduction under sub-section (1)(b) and (c) shall not exceed—

(a) Rs. 200000, subject to the following conditions:—

(i) the property has been acquired or constructed with borrowed capital and such acquisition or construction is completed within five years from the end of tax year in which capital was borrowed;

(ii) the assessee furnishes a certificate from the person to whom interest is payable on such capital; and

(b) Rs. 30000 in any other case.

(3) The deduction under section 22(1)(c) shall be computed after reducing the interest referred to in the said section by any amount already allowed as a deduction under any other provisions of this Act.

(4) The certificate referred to in sub-section (2) shall specify—

(a) the amount of interest payable on capital borrowed; and

(b) the interest payable on any new loan, where subsequent to the capital borrowed, the assessee has taken any such loan for repayment of whole or any part of such capital.

(5) The aggregate of the amounts of deduction under sub-section (2) in respect of properties of the nature referred to in section 21(6) shall not exceed Rs. 200000.

(6) Any interest chargeable under this Act which is payable outside India shall not be allowed as a deduction under this section, if—

(a) tax has not been paid or deducted on such interest under Chapter XIX-B;

(b) in respect of such interest, there is no agent in India as per section 306.

Sub-sections

Sub-section (1)

Three deductions from annual value:

  • (a) 30% of annual value — standard deduction
  • (b) Interest on borrowed capital — for acquisition, construction, repair, renewal, or reconstruction
  • (c) Pre-construction interest — in 5 equal instalments starting from the year of acquisition/construction

Sub-section (2)

Self-occupied property (section 21(6)) interest cap:

  • Rs. 2,00,000 if acquisition/construction completed within 5 years of borrowing + certificate furnished
  • Rs. 30,000 in any other case

Sub-section (3)

Pre-construction interest to be reduced by amounts already allowed as deduction under any other provision.

Sub-section (4)

Certificate requirements: must specify interest payable on original capital and on any refinancing loan.

Sub-section (5)

Aggregate cap: total interest deduction across all self-occupied properties under section 21(6) shall not exceed Rs. 2,00,000.

Sub-section (6)

Interest payable outside India: not deductible unless TDS under Chapter XIX-B has been paid/deducted, or there is an agent in India under section 306.

Provisos

None.

Explanations

None.

Tables

None.

Key Structure

  • Applies to: All properties taxable under the head “Income from house property”
  • Deductions available:
    • 30% standard deduction on annual value (clause (a)) — flat rate, no actuals needed
    • Interest on borrowed capital (clause (b)) — full deduction for let-out property; capped for self-occupied
    • Pre-construction interest (clause (c)) — in 5 equal annual instalments
  • Self-occupied property interest cap (sub-section 2):
    • Rs. 2,00,000 — if acquisition/construction completed within 5 years + certificate
    • Rs. 30,000 — in all other cases (e.g., repair/renewal, or completion beyond 5 years)
  • Aggregate cap (sub-section 5): Rs. 2,00,000 across all self-occupied properties
  • Let-out property: No cap on interest deduction — full amount deductible (can create house property loss)
  • Pre-construction interest: Must be reduced by amounts claimed elsewhere; spread over 5 years
  • Foreign interest: Requires TDS compliance or India-based agent

Cross-References

  • s021-annual-value — Section 21: annual value determination (the base on which deductions apply); section 21(6) defines self-occupied properties
  • s020-charging — Section 20: charging section
  • s132-housing-loan-interest — Section 132: additional deduction for first-time homebuyers (old 80EE/80EEA)
  • _index — Section 109(1)(b): house property loss set-off capped at Rs. 2,00,000 against other heads
  • _index — Chapter XIX-B: TDS compliance for foreign interest (sub-section (6))
  • Section 306 (not yet ingested) — Agent of non-resident (referenced at sub-section (6)(b))

Amendment Notes

  • Finance Act 2026 amendment: Sub-section (2) — “sub-section (1)(b)” substituted with “sub-section (1)(b) and (c)“. This means the Rs. 2,00,000 / Rs. 30,000 cap for self-occupied property now explicitly covers both current-year interest and pre-construction interest instalments together.

Practical Notes

  • For let-out property, there is no cap on interest deduction — this can create a significant house property loss, but set-off against other heads is capped at Rs. 2,00,000 (section 109(1)(b)).
  • The 30% standard deduction is on annual value (after deducting local authority taxes under section 21(3)) — it replaces all actual maintenance, repair, and insurance expenses.
  • The 5-year completion window for the Rs. 2,00,000 cap is calculated from the end of the tax year of borrowing — not from the date of borrowing.
  • Pre-construction interest spread over 5 years starts from the year of completion, not the year of borrowing.
  • The Finance Act 2026 amendment to sub-section (2) is significant — it clarifies that pre-construction interest instalments are also within the Rs. 2,00,000 cap for self-occupied property.
  • Refinanced loans: sub-section (4)(b) requires the certificate to also cover interest on any new loan taken for repayment of the original capital.

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