Income from House Property and Annual Value under Sections 22 and 23
Sections 22 and 23 of the Income-tax Act, 1961 governed the basic charge and determination of annual value for income from house property. From 1 April 2026, the corresponding provisions for Tax Year 2026-27 and later years are Sections 20 and 21 of the Income-tax Act, 2025.
Contents
- Section 22 of the Income-tax Act, 1961
- Section 23 of the Income-tax Act, 1961
- Current law from 1 April 2026
- How annual value is determined
- Self-occupied house property
- Property held as stock-in-trade
Section 22 of the Income-tax Act, 1961: Income from house property
Section 22 is the charging provision for this head of income. Broadly, the annual value of buildings or lands appurtenant to buildings owned by the assessee is chargeable under the head Income from house property. The portion of a property occupied by the owner for a business or profession whose profits are chargeable to income-tax is excluded.
For the official legacy provision, see the Income Tax Department page for Section 22 of the Income-tax Act, 1961.
Section 23 of the Income-tax Act, 1961: Annual value
Section 23 lays down how annual value is determined. For a let-out property, the provision compares the amount for which the property might reasonably be expected to let from year to year with the actual rent received or receivable. It also provides relief where actual rent is lower because the property remained vacant during the whole or part of the previous year.
Municipal or other local-authority taxes borne by the owner are deducted in determining annual value when they are actually paid. Subject to the applicable rules, rent that the owner cannot realise is excluded from actual rent received or receivable.
As amended by the Finance Act, 2025, Section 23(2) permits nil annual value where the house is occupied by the owner for his or her own residence or cannot actually be occupied by the owner for any reason. The benefit is limited to two houses specified by the assessee, subject to the statutory conditions.
For the official text as amended before repeal, see the Income-tax Act, 1961 as amended by Finance Act, 2025.
Current law: Sections 20 and 21 of the Income-tax Act, 2025
For Tax Year 2026-27 onward, the corresponding provisions are contained in the Income-tax Act, 2025. Section 20 deals with the charge under the head Income from house property, while Section 21 determines annual value.
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Income from house property | Section 22 | Section 20 |
| Determination of annual value | Section 23 | Section 21 |
| Deductions from house property income | Section 24 | Section 22 |
Section 20 of the 2025 Act charges the annual value of buildings and lands appurtenant thereto owned by the assessee, while excluding portions occupied for the assessee's taxable business or profession. Section 21 reorganises the annual-value rules into separate sub-sections covering expected rent, actual rent, vacancy, local-authority taxes, unrealised rent, stock-in-trade and self-occupied houses.
Official current provisions: Income-tax Act, 2025 and the Income Tax Department page for Section 21.
How annual value is determined under the current law
Under Section 21(1) of the Income-tax Act, 2025, annual value is generally the higher of the amount for which the property might reasonably be expected to let from year to year and the actual rent received or receivable where the property or any part of it is let.
If a let property remains vacant for the whole or part of the tax year and, because of that vacancy, the actual rent is lower than the expected rent, Section 21(2) treats the actual rent received or receivable as the annual value. Section 21(3) then permits reduction of local-authority taxes, including service taxes, actually paid by the owner during the tax year. Section 21(4) excludes unrealised rent from actual rent, subject to the prescribed rules.
Self-occupied house property
Section 21(6) of the Income-tax Act, 2025 provides that the annual value of a house or part of a house is nil if the owner occupies it for his or her own residence or cannot actually occupy it due to any reason. Under Section 21(7), this treatment can apply to only two houses specified by the assessee. It does not apply where the house or any part of it is actually let at any time during the tax year or where the owner derives another benefit from it.
Property held as stock-in-trade
Where a property is held as stock-in-trade and is not let wholly or partly at any time during the tax year, Section 21(5) of the Income-tax Act, 2025 provides nil annual value for two years from the end of the financial year in which the completion certificate is obtained from the competent authority. The Finance Act, 2026 corrected the wording of this provision with effect from 1 April 2026.
Practical summary
| Situation | General treatment |
|---|---|
| Owner-occupied eligible house | Annual value may be nil, subject to the two-house limit and other conditions. |
| Let-out property | Annual value is based on expected rent and actual rent, with the statutory vacancy rule. |
| Municipal taxes | Deductible in determining annual value when actually paid by the owner, subject to the Act. |
| Unrealised rent | Excluded from actual rent subject to the prescribed rules. |
| Property used for owner's taxable business or profession | Relevant occupied portion is not charged under the head Income from house property. |
| Unsold property held as stock-in-trade | Nil annual value for the statutory two-year period after the relevant completion year, subject to Section 21(5). |
Updated: 27 September 2026. This article is a general legal and tax information resource. For a particular tax year, verify which Act applies and consider the facts of the property and the applicable rules.