Types of House Properties — SOP, LOP, DLOP & Stock-in-Trade
# Three Categories of House Properties
## 1. Self-Occupied Property (SOP)
Property which the assessee uses for his own residence, OR which is unoccupied for any reason.
An assessee can claim up to TWO house properties as SOP.
For SOP, GAV is taken as NIL.
## 2. Let-Out Property (LOP)
Property which the assessee has let out to a tenant on rent.
Income is computed normally — GAV, municipal taxes, standard deduction, interest.
## 3. Deemed Let-Out Property (DLOP)
If the assessee owns more than two house properties and uses them for self-occupation:
He chooses any two to treat as SOP.
The remaining properties are treated as Deemed Let-Out (DLOP).
DLOP is computed exactly like LOP — but the rent used is the expected rent (since there is no actual rent).
## Special Case — Property held as Stock-in-Trade (Builder/Developer)
Even when the property is held as stock-in-trade, its annual value is, in principle, taxable under HP.
However: Annual Value is treated as NIL for 2 years from the end of the Financial Year in which the Certificate of Completion is obtained from the competent authority — provided the property is NOT let out during that period.
After this 2-year holiday, if the unsold flat is still vacant, it becomes a deemed-let-out property.
## Summary Table
Category
Number Allowed
GAV
SOP
Max 2 (assessee's choice)
NIL
LOP
No limit
Actual / Expected rent
DLOP
All beyond the 2 SOPs
Expected rent
Stock-in-trade (2-yr window post CC)
—
NIL (if not let out)
Worked example
### Example 1
Example 1: Mr. K owns 4 self-occupied houses (none let out). He chooses houses 1 & 2 as SOP (GAV = NIL each). Houses 3 & 4 are treated as DLOP — their expected rent forms GAV.
Example 2 (Stock): ABC Builders gets Certificate of Completion for Project A on 1st Feb 2024. 5 flats remain unsold. Annual Value of these unsold flats is NIL until FY 2025-26 ends (2 years from end of FY 2023-24). From FY 2026-27 onward, deemed let-out treatment applies.
⚠️ Common exam mistakes
Claiming SOP for more than 2 properties — only 2 allowed.
Treating an unoccupied house as something other than SOP — even if no one lives in it, the assessee can still claim it as SOP.
Forgetting the 2-year NIL window for stock-in-trade properties — and computing notional rent on unsold flats prematurely.
Computing the 2-year window from the Calendar Year instead of from the end of the Financial Year in which the Completion Certificate is obtained.
Bare-Act text Section 23(2), 23(4) and 23(5) · Income-tax Act, 1961 · click to expand
Section 23(2): Where the property consists of a house or part of a house which (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place — the annual value shall be taken to be nil.
Section 23(4): Where the property referred to in sub-section (2) consists of more than two houses — (a) the provisions of that sub-section shall apply only in respect of two of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, other than the house or houses in respect of which the assessee has exercised an option, shall be determined under sub-section (1) as if such house or houses had been let.
Section 23(5): Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to two years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.