## Types of House Properties and Their Annual Value

### 1. Let-Out Property (LOP)

GAV is computed only if the property (or part) is let out for any part of the PY.
Actual rent details are available only for an LOP.

### 2. Self-Occupied (SOP) / Unoccupied Property (UOP) — Section 23(2)

Annual value is taken as ZERO (NAV = 0) if both conditions hold:

1. The property is NOT rented at any time during the year.

2. No other benefit is derived from the property.

This benefit is available only to an individual or HUF, and for ANY 2 properties.
For SOP/UOP where NAV = 0, municipal taxes paid are ignored (no deduction).
An Unoccupied Property is one the owner cannot use for some reason. (Amended by Finance Act 2025:) e.g. the owner lives elsewhere for work/business/profession and resides in a building they do not own.

### 3. Deemed Let-Out Property (DLOP) — Section 23(4)

If the assessee has more than 2 SOP/UOP properties, then at the assessee's option NAV = 0 is taken for any 2, and the remaining properties are deemed let out (DLOP).
For a DLOP, Expected Rent is directly taken as GAV, and municipal taxes are deductible.
Actual rent is not relevant (it is deemed, not actually, let out).
The choice of which 2 properties get NAV = 0 can be changed every previous year.

### 4. Part of the year LOP and part of the year SOP/UOP — Section 23(3)

Treated as if the property is let out for the full year.
GAV computation is the same as the standard table.
Expected Rent → full year; Actual Rent → only the let-out period.
Vacancy, if any, is also considered as discussed in the GAV rules.

### 5. A portion let-out and a portion SOP/UOP

Each portion is treated as a separate property.
Annual value is computed for each portion under its respective rules.
Fair Rent, Municipal Value and Standard Rent are split between the portions.
Municipal taxes paid and interest on borrowed capital are also split on a suitable basis.

Worked example

### Example 1

More than 2 self-occupied houses (DLOP): An individual owns 3 houses, all self-occupied. He may elect NAV = 0 for any 2; the 3rd is a Deemed Let-Out Property. For the DLOP, GAV = Expected Rent, municipal taxes paid are deductible, 30% standard deduction is allowed, and interest on borrowed capital is allowed with NO ceiling. The choice of the two NAV-nil houses can be revised each year to minimise tax.

### Example 2

Partly let, partly self-occupied: A house has two equal floors — one let out for ₹10,000 p.m. and one self-occupied. Each floor is a separate property: FR, MV, SR, municipal taxes and interest are apportioned 50:50. The let-out floor is computed as an LOP; the self-occupied floor takes NAV = 0 (subject to the 2-property limit).

⚠️ Common exam mistakes

Giving the NAV = 0 (self-occupied) benefit to more than 2 properties — beyond 2, the extras become deemed let-out.
Deducting municipal taxes for an SOP/UOP whose NAV is taken as zero — those taxes are ignored; but for a DLOP municipal taxes ARE deductible.
Using actual rent for a DLOP — a DLOP has no actual rent; GAV is simply the Expected Rent.
Computing Expected Rent only for the let-out period in a part-year let (Sec 23(3)) case — ER is for the full year, only Actual Rent is for the let-out period.
Forgetting that the SOP NAV=0 benefit is available only to individuals and HUFs.

Reference: Section 23(2), 23(3), 23(4) — Income-tax Act, 1961

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Types of house property — LOP, SOP/UOP, DLOP, part-year and partly-let property

Worked example

⚠️ Common exam mistakes