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Property · Rental Income

Loss from House Property: ₹2L Cap on Set-Off and Carry Forward

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Most home loan holders don't know that their loss from house property (excess of home loan interest over rental income) can reduce their taxable salary, but only up to ₹2L per year in the old regime. The remaining loss is carried forward for 8 years and can only be set off against future house property income.

Provisions

Sec 22(1)(b) (old 24(b)); Sec 109 (old 71); Sec 110 (old 71B); Sec 263(1) (old 139(1)); New Regime

Analysis

How house property loss works in practice: Let-out flat: annual rent ₹3L. Home loan interest: ₹5L. Municipal tax: ₹20K. Computation: Gross rent ₹3L − 30% standard deduction ₹90K − municipal tax ₹20K = Net rental income ₹1.9L. Less: home loan interest ₹5L. Net house property income: ₹1.9L − ₹5L = LOSS of ₹3.1L. Set off against salary: maximum ₹2L. Remaining ₹1.1L: carried forward to next 8 years (can only be set off against future HP income). Self-occupied property with home loan: No rental income. Home loan interest: ₹4L. Sec 22(1)(b), Income-tax Act 2025 (old Sec 24(b)) deduction: capped at ₹2L for self-occupied. So maximum loss = ₹2L. Set off against salary: ₹2L. Tax saving at 30%: ₹60,000/year. This is why salaried people with home loans in old regime benefit significantly. Two properties, which is self-occupied? Finance Act 2019: both properties can be declared self-occupied (earlier only one).

Close

  1. List all properties: self-occupied, let-out, deemed let-out
  2. For let-out: compute annual rental income (actual rent, not just received, includes advances)
  3. Apply 30% standard deduction and municipal tax paid to arrive at net rental income
  4. Compute home loan interest from bank certificate (full year)
  5. Net house property income = (rental − 30% SD − muni tax) − home loan interest
  6. If negative (loss): set off up to ₹2L against salary (old regime only)

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