Income from Deemed Let Out House Property

As per the income tax act, assessee can declare 2 house properties as Self-occupied while he/she has to compulsorily declare all others as rented out. It means the subsequent properties are considered as deemed let out House Property. Further, assessee needs to calculate rent based on fair market value and tax is levied on the same. Deemed Let Out Property is also known as Vacant Property.

Up to FY 2018-19, a taxpayer was allowed to claim only 1 property as Self Occupied and the rest were considered as Deemed Let Out. However, from FY 2019-20, a taxpayer can claim 2 properties as Self Occupied. This will help those taxpayers who own more than 1 property.
Tip
Up to FY 2018-19, a taxpayer was allowed to claim only 1 property as Self Occupied and the rest were considered as Deemed Let Out. However, from FY 2019-20, a taxpayer can claim 2 properties as Self Occupied. This will help those taxpayers who own more than 1 property.

The calculation of income from Deemed let-out property is similar to Let Out House. However, deduction u/s 24(b) is available up to 2 lakhs rupees i.e, same as Self Occupied.

What is the difference between Self Occupied & Let Out?

Self-Occupied Let Out
A Self Occupied House Property is the one that you use as your own residence, your spouse, children and/or parents. Let Out is when you give a house property for rent for during the financial year either for the whole or a part of the year. 

In case you have multiple house properties, from AY 2020-21 you can show 2 properties self-occupied house property.
The other house properties are vacant then they should be taken as deemed let-out house property.

How to Determine Taxable Income from Deemed Let Out House Property?

Income from Deemed Let Out Property is calculated as per the following steps:

  1. Calculate Gross Annual Value (GAV)
  2. Deduct Municipal Taxes
  3. Calculate Net Annual Value (NAV)
  4. Claim Standard Deduction of 30%
  5. Deduct Interest paid on Home Loan u/s 24(b)

  1. Calculate Gross Annual Value (GAV)

    GAV of Deemed let out property is least of the following:
    – Fair Rent Value (FRV) (Determined using Annual Rent Value of similar properties in your area)
    – Assessed Value (Determined as per Municipal Tax Value of the property)
    – Standard Rent (Determined as per Rent Act)

  2. Deduct Municipal Taxes Paid

    Municipal tax is nothing but a property tax paid by a taxpayer. The deduction of the full amount of Municipal Taxed paid is allowed. It reduces the Net Annual Value of the property. This deduction is not allowed if not paid by the owner

  3. Calculate Net Annual Value (NAV)

    NAV is nothing but GAV reduced by Municipal Taxes Paid.

Particulars Self Occupied Let Out Deemed Let Out
Gross Annual Value (Generally, total rent received) NIL XXX XXX
Less: Municipal Taxes Paid Not Applicable XX XX
Net Annual Value NIL XXX XXX
Less: Deduction u/s 24
1. Standard Deduction at 30%
2. Interest on Housing Loan
Not Applicable INR 2 Lakh Limit XX
No Limit
XX
No Limit
Income from House Property (XXX) XX XXX
ITR for Multiple House Properties
CA Assisted Income Tax Return filing for Individuals and HUFs having multiple house property income, multiple salaries and income from other sources.
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ITR for Multiple House Properties
CA Assisted Income Tax Return filing for Individuals and HUFs having multiple house property income, multiple salaries and income from other sources.
[Rated 4.8 stars by customers like you]

FAQs

What is the difference between let out and deemed let out?

Property that is given on rent for the whole or part of the year is termed as Let Out House Property. If a person has more than one, in such a case only one can be considered as self-occupied at the option of the individual.

How do you claim loss on property?

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 property that can be claimed for a year is restricted to INR 2 lakhs.

Can we carry forward loss from self occupied house property?

In case the Loss from House Property has not been adjusted in the same year, such loss will be carried forward to the next year and allowed to be set off with income arising other the same head i.e. House Property.

Got Questions? Ask Away!

  1. Hey Yash,

    Yes, you need to have pay tax on the notional income for the vacant house property. Meaning, on the rent income you would if it were rented, and it will be treated as deemed let out house property.

    You can check out the computation of Income on Deemed Let-Out house property article on our learn center.