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Dear Students/Readers,

Let us start with small practical scenario.

Your dad is residing in a house owned by him and incurred interest on housing loan of Rs. 1,80,000. Then computation under the head house property is as under:



Gross Annual Value (Section 23)


Less: Municipal Taxes paid during the previous year


Net Annual Value


Less: 30% of Net Annual Value


Less: Interest on borrowed capital –section 24(b)


Income under the head house property


Now, the moot question is that your dad has not let out property, then how head "House Property" get attracted in his case?

Conditions relevant for attracting head "Income from House Property"

Section 22 stipulates the following three cumulative conditions to attract head "House Property".

(1) The property should consist of any buildings or lands appurtenant thereto
(2) The assessee should be owner of the property.
(3) The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to income-tax.

On primary analysis of the above conditions, it is gained that section 22 nowhere requires that house property should be let out to attract the head "House Property".

That means, annual value of house property shall be assessed under this head even if assessee is not in receipt of actual rent income. And such annual value shall be determined in accordance with section 23 of the Act.

Thank God that Annual Value of self-occupied Property is NIL as per the provisions of section 23(2) of the Act.

Income from house Property: A Notional Head of Income

Concept of deemed to be let-out

When assessee owns more than one residential house property and all are reserved for self-occupation, then all the house properties become subject matter of this head because all the conditions enumerated under section 22 are satisfied.

However, section 23(4) provides that, at the option of assessee, two house properties is to be selected as self-occupied and other house properties shall be deemed to be let out.

As a result,

(a) The two houses which have been selected as self-occupied, Annual Value shall be taken at NIL.
(b) While for deemed to be let out properties, Annual value shall be Expected Rent to be determined in accordance with the requirements of section 23(1) of the Act.


How to get rid of this notional head for deemed to be let out properties?

I want all of you to participate and leave your replies in "Comment Box".

You can also listen me


To enroll May 21 / Nov 21 Direct Tax Laws and International Taxation (CA Final New DT) subject by the author: Click Here
To enroll June 21 / Dec 21 Direct Tax Laws and International Taxation (CMA Final New DT) subject by the author: Click Here

Happy Learning,
All the best.



Published by

CA Mehul Thakker
(Managing Partner)
Category Income Tax   Report

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