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Municipal taxes are deductible from annual value in the year they are actually paid by the owner. Paying two years together lets you deduct both in the year of payment. Tax paid by the tenant is not deductible by you.
ITR
Deducting property tax for a rented flat
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Provisions
Sec 23, Income-tax Act 1961; Sec 22 (now Sec 20)
Analysis
If you paid ₹24,000 for two years in FY 2025-26, you reduce annual value by ₹24,000 for that year, which also lowers the 30% deduction base. This applies only to let out or deemed let out houses, since self-occupied houses already have nil value. Keep the receipts with the payment date. Water and sewerage charges levied by the local body as tax also count.
Close
- Collect municipal tax receipts with payment dates.
- Deduct amounts paid by you in the year.
- Apply 30% on the reduced value.
- Report in Schedule HP.
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