Is rental Income from sub-letting chargeable to tax under the head ‘Income from house property’?

Rental income in the hands of owner is charged to tax under the head “Income from house property”.

Rental income of a person other than the owner cannot be charged to tax under the head “Income from house property”.

Hence, rental income received by a tenant from sub-letting cannot be charged to tax under the head “Income from house property”. Such income is taxable under the head “Income from other sources” or profits and gains from business or profession, as the case may be.​

While computing income chargeable to tax under the head “Income from house property” in the case of a let-out property, what are the expenses to be deducted from gross annual value?​​​​

While computing income chargeable to tax under the head “Income from house property” in the case of a let-out property, only following items can be claimed as deductions from gross annual value.

  • Deduction on account of municipal taxes paid by the taxpayer during the year (*).
  • Deduction under section 24(a) @ 30% of Net Annual Value.
  • Deduction under section 24(b​)​​ on account of interest on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property.

(*) Only municipal taxes paid by the owner during the year can be deduced, hence, municipal taxes due but not paid during the year cannot be deducted or taxes borne by the tenant cannot be deducted.

Can I Claim deduction under section 24 and 80C, if a home loan has been availed for 2 houses?

Yes, a taxpayer can claim deduction under Section 24 of interest paid on home loan for each of the houses separately. However, the overall loss from house property that can be claimed for a year is restricted to Rs 2 lakhs.

As regards 80C deduction, the principal portion of home loan repaid in respect of both houses can be claimed. However within the overall limit of Rs 1,50,000 for each financial year.