Computation of House Property Income & Section 24 Deductions
# Computation of House Property Income
## Master Format
Particulars
LOP
DLOP
SOP
Gross Annual Value (GAV)
xxx
xxx
NIL
(-) Municipal Taxes paid by owner
(xxx)
(xxx)
—
Net Annual Value (NAV)
xxx
xxx
NIL
(-) Standard Deduction @ 30% of NAV [u/s 24(a)]
(xxx)
(xxx)
—
(-) Interest on Borrowed Capital [u/s 24(b)]
(xxx)
(xxx)
(xxx)
Income / (Loss) from House Property
xxx
xxx
(xxx) Loss
## Key Points on Each Deduction
### Standard Deduction — Section 24(a)
Flat 30% of NAV.
Allowed regardless of actual expenses (repairs, insurance, collection charges — all bundled here).
For SOP: NAV is NIL → Standard Deduction is NIL (you cannot create a loss out of it).
### Interest on Borrowed Capital — Section 24(b)
Allowed on loan taken for purchase, construction, repair, renovation, or reconstruction.
For LOP / DLOP: Full interest allowed (no upper cap).
For SOP: Capped (₹2,00,000 or ₹30,000 depending on conditions — covered separately).
This is the only deduction available to a Self-Occupied Property.
## Why SOP Generates a Loss
GAV = NIL, so NAV = NIL.
No standard deduction (since NAV is NIL).
But interest on borrowed capital is still allowed → creates a loss under House Property.
This loss can be set off against other heads of income (subject to ₹2,00,000 cap in inter-head set-off).
## Cross-Head Reminder
Loss from HP can be set off against any other head of income up to ₹2,00,000 in the current year.
Unabsorbed HP loss can be carried forward for 8 AYs and set off only against HP income.
Worked example
### Example 1
Example 1 (LOP):
GAV = ₹3,00,000
Municipal Taxes paid = ₹30,000
Interest on home loan = ₹1,80,000
NAV = 3,00,000 − 30,000 = ₹2,70,000
Standard Deduction @ 30% = ₹81,000
Interest = ₹1,80,000
Income from HP = ₹9,000
Example 2 (SOP):
Self-occupied property; home loan interest = ₹2,40,000 (loan taken after 1.4.1999 for purchase, completed within 5 years)
GAV = NIL → NAV = NIL
Standard Deduction = NIL
Interest u/s 24(b) = capped at ₹2,00,000
Loss from HP = (₹2,00,000)
⚠️ Common exam mistakes
Claiming standard deduction on SOP — NAV is NIL, so standard deduction is also NIL.
Forgetting that interest on borrowed capital is fully allowed (no cap) for LOP & DLOP — the cap applies only to SOP.
Computing standard deduction on GAV instead of NAV — it must be on NAV.
Not reducing municipal taxes from GAV before applying standard deduction.
Carrying forward the full HP loss against any income — it can be carried forward only against future HP income.
Bare-Act text Section 24(a) and 24(b) · Income-tax Act, 1961 · click to expand
Section 24: Income chargeable under the head 'Income from house property' shall be computed after making the following deductions, namely — (a) a sum equal to thirty per cent of the annual value; (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction or, as the case may be, the aggregate of the amount of deduction shall not exceed thirty thousand rupees. Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed, the amount of deduction or, as the case may be, the aggregate of the amounts of deduction under this clause shall not exceed two lakh rupees.