For income to be taxed under the head “Income from House Property” (Sections 22-27 of the Income Tax Act, 1961), all of the following conditions must be satisfied:
1. The Property Must Consist of a Building or Land Appurtenant (Attached) to It
- Includes:
- Residential houses, flats, bungalows
- Commercial properties (shops, offices, warehouses)
- Land attached to the building (garden, garage, parking space)
- Excludes:
- Vacant land without any construction (taxed under Capital Gainsor Other Sources)
- Agricultural land with a farmhouse (exempt under Section 10(1))
2. The Assessee Must Be the Owner of the Property
- Ownership can be:
- Legal owner(registered in government records)
- Beneficial owner(has the right to use/enjoy the property)
- Not applicable to:
- Tenants (rent paid is not taxed under this head)
- Leaseholders (unless lease > 12 years, treated as deemed ownership)
3. The Property Should Not Be Used for the Owner’s Business/Profession
- If the property is used for business or profession, it is taxed under “Profits and Gains from Business or Profession” (PGBP)and not under “House Property.”
Example:
- A shop rented out → Taxable under House Property
- A shop used for own business → Taxable under PGBP
4. The Property Should Not Be Exempt Under Section 23(2) (Self-Occupied Property Rule)
- Self-occupied property (SOP):
- Only one housecan be declared as self-occupied (taxable income = Zero).
- Interest deduction up to ₹2 lakhallowed on home loan (Section 24).
- Additional self-occupied houses:
- Deemed as let-outand taxed on Fair Rental Value (FRV).
Exceptions (When Income is Not Taxable Under This Head)
| SCENARIO | TAX TREATMENT |
| Property used for business | Taxed under PGBP |
| Agricultural land with farmhouse | Exempt (Section 2(1A)) |
| Property held as stock-in-trade (by builders) | Taxed as Business Income |
| Rent-free accommodation for employees | Taxed under Salary Income (for employee) |
Key Points …
✔ Only buildings (or attached land) are taxed under this head.
✔ Ownership is mandatory (legal/beneficial).
✔ Business-use property is taxed under PGBP, not House Property.
✔ Self-occupied property is tax-free (but interest deduction allowed).
✔ Multiple self-occupied houses are deemed let-out.
