Many people purchase residential properties to live in or earn rental income. However, owning a house does not always result in taxable income. Sometimes, the interest on a home loan exceeds the rental income and other eligible amounts. As a result, the property may generate a loss for income tax purposes.
The Income Tax law allows taxpayers to adjust certain house property losses against other income and carry forward eligible losses to future years.
Earlier, the Income-tax Act, 1961 governed these provisions under Sections 70, 71 and 71B. However, the Income-tax Act, 2025 came into effect on 1 April 2026 and introduced corresponding provisions under Sections 108, 109 and 110.
Furthermore, the treatment of house property losses differs between the old and new tax regimes.
Therefore, homeowners should understand how to calculate a house property loss, how to adjust it against other income and how to claim eligible losses in future years.
This article explains the latest rules for loss from house property in India, with simple examples, tax calculations and practical guidance.
What Is Income from House Property?
Income from house property generally includes taxable income arising from buildings or land attached to buildings owned by a taxpayer.
For example, if you own a residential flat and rent it to another person, the rental income generally falls under the head Income from House Property.
However, the law provides different rules when an owner uses the property for a business or profession.
Moreover, the tax treatment may change depending on whether the property is self-occupied, rented or treated as deemed let-out.
Example of Income from House Property
Suppose Mr. A owns a residential building with 10 rooms.
He rents each room for ₹3,000 per month.
| Particulars | Amount |
|---|---|
| Number of Rooms | 10 |
| Monthly Rent per Room | ₹3,000 |
| Total Monthly Rent | ₹30,000 |
| Annual Rental Income | ₹3,60,000 |
Therefore, Mr. A earns ₹3,60,000 in annual rental income.
However, this amount does not automatically become his taxable house property income.
First, he must calculate the property’s annual value. Thereafter, he can claim eligible municipal taxes, the standard deduction and home loan interest.
What Is Loss from House Property?
A loss from house property arises when the deductions allowed under the Income Tax law exceed the property’s taxable annual value.
In simple terms, the taxpayer may have a negative amount under the head Income from House Property.
For example, suppose a landlord earns ₹3,00,000 in annual rent but pays ₹3,50,000 in eligible home loan interest.
After considering the standard deduction and other permitted adjustments, the property may generate a loss.
However, the law does not allow every expense incurred on a house as a separate deduction.
Therefore, taxpayers must calculate the loss according to the prescribed provisions.
Types of House Property
The calculation of house property income depends on how the owner uses the property.
Self-Occupied House Property
A self-occupied property is a house that the owner uses for personal residence.
For a qualifying self-occupied property, the law generally treats the annual value as nil.
However, eligible home loan interest may create a house property loss under the old tax regime.
For example, suppose a taxpayer pays ₹1,50,000 in qualifying home loan interest on a self-occupied house.
Under the old tax regime, the taxpayer may claim the eligible interest deduction and report a house property loss of ₹1,50,000.
However, the new tax regime does not allow the home loan interest deduction for a self-occupied property.
Let-Out House Property
A let-out property is a house that the owner rents to another person.
The owner must calculate the annual value and deduct eligible municipal taxes, the standard deduction and qualifying interest on borrowed capital.
If the total deductions exceed the net annual value, the property generates a loss.
For example, a landlord may earn ₹4,00,000 in annual rent but incur substantial home loan interest.
Consequently, the final house property calculation may result in a loss.
Deemed Let-Out House Property
A property may also qualify as deemed let-out under the applicable provisions.
For example, when a taxpayer owns more than two properties that would otherwise qualify for self-occupied treatment, the law may require the taxpayer to determine the annual value of the additional property.
Therefore, taxpayers with multiple houses should review the property classification before calculating taxable income.
How to Calculate Loss from House Property
Taxpayers must follow the prescribed method for calculating income or loss from house property.
The general calculation is:
Gross Annual Value
Less: Eligible Municipal Taxes Actually Paid by the Owner
= Net Annual Value
Less: Standard Deduction at 30%
Less: Eligible Interest on Borrowed Capital
= Income or Loss from House Property
Therefore, the final amount may be positive or negative.
Example of Loss from a Rented Property
Suppose Mr. B owns a residential flat in Greater Noida.
He receives ₹25,000 per month as rent.
During the year, he pays ₹20,000 in eligible municipal taxes and incurs ₹3,50,000 in home loan interest.
| Particulars | Amount |
|---|---|
| Annual Rental Income | ₹3,00,000 |
| Less: Municipal Taxes Paid | ₹20,000 |
| Net Annual Value | ₹2,80,000 |
| Less: Standard Deduction at 30% | ₹84,000 |
| Less: Home Loan Interest | ₹3,50,000 |
| Loss from House Property | -₹1,54,000 |
Therefore, Mr. B has a house property loss of ₹1,54,000.
However, the tax benefit depends on whether he follows the old or new tax regime.
The example assumes that the actual rent represents the gross annual value and that the interest qualifies for deduction.
Home Loan Interest Deduction Under the Income-tax Act, 2025
Home loan interest plays an important role in calculating house property losses.
Earlier, Section 24(b) of the Income-tax Act, 1961 allowed the deduction.
From 1 April 2026, Section 22 of the Income-tax Act, 2025 provides the corresponding deduction.
However, the deduction limits depend on the property’s use and the applicable tax regime.
Home Loan Interest Deduction Under the Old Tax Regime
| Property Type | General Interest Deduction |
|---|---|
| Self-occupied property purchased or constructed with a qualifying loan | Up to ₹2,00,000 |
| Self-occupied property where higher-limit conditions are not satisfied | Up to ₹30,000 |
| Self-occupied property repaired, renewed or reconstructed using borrowed funds | Up to ₹30,000 |
| Let-out property | Actual eligible interest, without a separate property-level ceiling |
The higher ₹2 lakh deduction generally requires taxpayers to satisfy the prescribed loan and completion conditions.
Furthermore, the ₹2 lakh ceiling applies to the aggregate qualifying interest deduction for self-occupied properties.
Home Loan Interest Under the New Tax Regime
Under the new tax regime, taxpayers cannot claim the home loan interest deduction for self-occupied properties.
However, they can generally deduct eligible interest while calculating income from let-out properties.
Nevertheless, the new regime restricts the adjustment and carry-forward of house property losses.
Therefore, taxpayers should compare the overall tax liability under both regimes before making a decision.
Can Two Houses Be Treated as Self-Occupied?
Yes. The Income Tax law generally allows taxpayers to treat up to two qualifying houses as self-occupied.
The Finance Act, 2025 simplified the relevant conditions from 1 April 2025.
As a result, eligible taxpayers can generally claim nil annual value for up to two qualifying houses when they occupy them for their own residence or cannot occupy them for any reason, subject to the statutory conditions.
However, the interest deduction limit remains subject to the prescribed ceiling.
Example of Two Self-Occupied Houses
Suppose Mr. C owns two self-occupied houses.
He pays ₹1,50,000 in qualifying home loan interest on the first property and ₹90,000 on the second.
| Particulars | House 1 | House 2 |
|---|---|---|
| Annual Value | Nil | Nil |
| Eligible Interest Before Overall Ceiling | ₹1,50,000 | ₹90,000 |
| Total Interest | ₹2,40,000 | |
| Maximum Aggregate Deduction Under Old Regime | ₹2,00,000 |
Therefore, Mr. C can generally claim a maximum aggregate deduction of ₹2,00,000 under the old tax regime, assuming he satisfies the higher-limit conditions.
He cannot claim ₹2 lakh separately for each property.
Example of Loss from Multiple House Properties
Suppose a taxpayer owns three houses.
Two properties qualify as self-occupied, while the third property is rented out.
The taxpayer pays home loan interest on all three properties.
Property-Wise Calculation
| Particulars | House 1: Self-Occupied | House 2: Self-Occupied | House 3: Let-Out |
|---|---|---|---|
| Gross Annual Value | Nil | Nil | ₹4,30,000 |
| Municipal Taxes | Nil | Nil | ₹23,000 |
| Net Annual Value | Nil | Nil | ₹4,07,000 |
| Standard Deduction at 30% | Nil | Nil | ₹1,22,100 |
| Income Before Interest | Nil | Nil | ₹2,84,900 |
| Eligible Interest Before Self-Occupied Ceiling | ₹1,50,000 | ₹90,000 | ₹6,50,000 |
| Property-Wise Result Before Aggregate Ceiling | -₹1,50,000 | -₹90,000 | -₹3,65,100 |
The combined interest on the two self-occupied properties amounts to ₹2,40,000.
However, the aggregate deduction under the old tax regime is generally restricted to ₹2,00,000.
Therefore, the combined loss from the two self-occupied houses is ₹2,00,000.
The rented property separately generates a loss of ₹3,65,100.
Total House Property Loss
| Particulars | Amount |
|---|---|
| Loss from Two Self-Occupied Houses After Applicable Ceiling | ₹2,00,000 |
| Loss from Let-Out Property | ₹3,65,100 |
| Total House Property Loss | ₹5,65,100 |
Therefore, the taxpayer has an aggregate house property loss of ₹5,65,100 under the stated old-regime assumptions.
However, the taxpayer cannot automatically adjust the entire loss against salary or other income.
Instead, the set-off rules determine the amount that can reduce other taxable income.
What Is Set-Off of House Property Loss?
Set-off means adjusting a loss against taxable income.
The Income Tax law generally recognises two methods:
- Intra-head set-off
- Inter-head set-off
Earlier, Sections 70 and 71 of the Income-tax Act, 1961 governed these adjustments.
From 1 April 2026, Sections 108 and 109 of the Income-tax Act, 2025 provide the corresponding rules.
However, taxpayers must also consider the restrictions under the applicable tax regime.
What Is Intra-Head Set-Off?
Intra-head set-off means adjusting a loss from one house property against income from another house property during the same tax year.
For example, suppose a taxpayer owns two houses.
One property generates taxable income of ₹1,40,000, while the other generates a loss of ₹4,80,000.
| Particulars | Amount |
|---|---|
| Income from House Property A | ₹1,40,000 |
| Loss from House Property B | -₹4,80,000 |
| Net House Property Loss | -₹3,40,000 |
Therefore, the taxpayer has a net house property loss of ₹3,40,000.
This adjustment takes place within the same income head.
What Is Inter-Head Set-Off?
Inter-head set-off means adjusting an eligible loss from one income head against income under another head.
For example, a taxpayer may earn salary income and incur a loss from house property.
Under the old tax regime, the taxpayer can generally adjust up to ₹2 lakh of net house property loss against income under other heads during the same tax year.
However, the new tax regime does not allow this adjustment against salary or other income heads.
Therefore, the taxpayer’s choice of tax regime affects the available benefit.
House Property Loss Set-Off Under the Old Tax Regime
Under the old tax regime, taxpayers can generally adjust a net house property loss of up to ₹2,00,000 against income under other heads during the year.
Any remaining eligible loss may be carried forward for adjustment against future house property income.
Example of House Property Loss Set-Off Against Salary
Suppose Mr. X earns ₹6,00,000 in salary income.
He also owns two properties.
Property A generates income of ₹1,40,000, while Property B generates a loss of ₹4,80,000.
| Particulars | Amount |
|---|---|
| Salary Income | ₹6,00,000 |
| Income from House Property A | ₹1,40,000 |
| Loss from House Property B | -₹4,80,000 |
| Net House Property Loss | -₹3,40,000 |
First, Mr. X adjusts the loss from Property B against the income from Property A.
Next, he adjusts ₹2,00,000 of the remaining loss against salary income under the old tax regime.
| Particulars | Amount |
|---|---|
| Net House Property Loss | ₹3,40,000 |
| Set-Off Against Salary | ₹2,00,000 |
| Balance Loss Carried Forward | ₹1,40,000 |
Therefore, Mr. X can generally reduce his salary income by ₹2,00,000 for tax computation purposes, subject to the applicable conditions.
He can carry forward the remaining eligible loss of ₹1,40,000.
However, he can use this brought-forward loss only against income from house property in future years.
House Property Loss Under the New Tax Regime
The new tax regime follows stricter rules for house property losses.
Taxpayers cannot adjust a house property loss against salary, business income or income from other sources.
For example, suppose a taxpayer earns ₹10,00,000 in salary income and incurs a house property loss of ₹1,50,000.
Under the old tax regime, the taxpayer may qualify for an inter-head set-off, subject to the prescribed conditions.
However, under the new tax regime, the taxpayer cannot reduce salary income by that loss.
Furthermore, the new regime restricts the carry-forward of such losses.
Therefore, taxpayers should compare both regimes before claiming house property deductions.
Old vs New Tax Regime Comparison
| Particulars | Old Tax Regime | New Tax Regime |
|---|---|---|
| Self-occupied home loan interest deduction | Available, subject to limits | Not available |
| Let-out property interest deduction | Available | Available while calculating house property income |
| Set-off of house property loss against salary | Up to ₹2 lakh | Not allowed |
| Carry-forward of eligible house property loss | Generally up to 8 years | Restricted |
Can House Property Loss Be Carried Forward?
Yes. Under Section 110 of the Income-tax Act, 2025, eligible unadjusted house property losses can generally be carried forward for up to eight subsequent tax years.
Earlier, Section 71B of the Income-tax Act, 1961 governed the corresponding provision.
However, taxpayers can adjust the carried-forward loss only against income from house property in subsequent years.
They cannot use it against salary or other income heads.
The carry-forward benefit also depends on the applicable tax regime and statutory conditions.
Example of Carry-Forward of House Property Loss
Suppose Mr. A carries forward an eligible house property loss of ₹1,40,000.
In the next tax year, he earns ₹1,00,000 in taxable house property income.
| Tax Year | Opening Loss | Set-Off | Closing Loss |
|---|---|---|---|
| 2026–27 | ₹1,40,000 | Nil | ₹1,40,000 |
| 2027–28 | ₹1,40,000 | ₹1,00,000 | ₹40,000 |
| 2028–29 | ₹40,000 | ₹40,000 | Nil |
Therefore, Mr. A can adjust the eligible loss against future house property income.
However, the original eight-year period does not restart when a balance remains unadjusted.
Can House Property Loss Be Carried Forward After Filing a Belated Return?
House property losses follow different filing conditions from certain other categories of losses.
Under the Income-tax Act, 1961, taxpayers could generally carry forward an eligible house property loss even when they filed a valid belated return.
This differed from the rules applicable to certain business and capital losses.
However, taxpayers should review the corresponding provisions of the Income-tax Act, 2025 when filing returns for Tax Year 2026–27.
Furthermore, a taxpayer must report the loss correctly and satisfy the applicable statutory conditions.
Therefore, filing the return within the prescribed due date remains the preferred approach.
Can Old House Property Losses Be Carried Forward Under the Income-tax Act, 2025?
Yes. The transition to the Income-tax Act, 2025 does not automatically cancel eligible house property losses from earlier years.
Section 536 of the new Act contains provisions for preserving eligible losses under the previous law.
For example, suppose a taxpayer has an eligible house property loss from Assessment Year 2024–25.
The taxpayer may continue to carry forward and adjust that loss under the new Act, subject to the original conditions and remaining carry-forward period.
However, the introduction of the new Act does not restart the eight-year period.
Therefore, taxpayers should maintain year-wise records of brought-forward losses.
How to Adjust Brought-Forward House Property Loss
Taxpayers can generally adjust eligible brought-forward house property losses only against income from house property.
For example, suppose a taxpayer carries forward ₹2,00,000 in house property loss.
In the following year, the taxpayer earns ₹1,20,000 in taxable house property income.
The taxpayer may adjust ₹1,20,000 against the brought-forward loss.
The remaining ₹80,000 may continue to be carried forward within the original permitted period.
However, the taxpayer cannot adjust this brought-forward loss against salary income.
Important Income-tax Act, 2025 Sections for House Property Loss
The following table compares the relevant provisions of the earlier and new income tax laws.
| Particulars | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| House property deductions | Section 24 | Section 22 |
| Intra-head set-off | Section 70 | Section 108 |
| Inter-head set-off | Section 71 | Section 109 |
| Carry-forward of house property loss | Section 71B | Section 110 |
| Transition of eligible losses | Not applicable | Section 536 |
Therefore, taxpayers filing returns for Tax Year 2026–27 should refer to the new section numbers.
However, the earlier provisions remain relevant when reviewing tax years governed by the Income-tax Act, 1961.
Common Mistakes While Calculating House Property Loss
Taxpayers often make avoidable errors while calculating and reporting house property losses.
Claiming ₹2 Lakh Separately for Every Self-Occupied House
The ₹2 lakh interest deduction generally applies as an aggregate ceiling for qualifying self-occupied properties.
Therefore, taxpayers cannot automatically claim ₹2 lakh separately for each house.
Adjusting the Entire Loss Against Salary
Under the old tax regime, the annual inter-head set-off of house property loss is generally limited to ₹2 lakh.
Therefore, taxpayers must apply the prescribed ceiling before reducing salary or other income.
Claiming Self-Occupied Home Loan Interest Under the New Tax Regime
The new tax regime does not allow home loan interest deduction for self-occupied properties.
Therefore, taxpayers should verify their selected regime before claiming the deduction.
Ignoring Income from Other Properties
Taxpayers should calculate income or loss from all relevant properties and apply the applicable intra-head adjustment rules.
Only after that should they determine the net loss eligible for further adjustment.
Treating All Rental Income as Business Income
Rental income does not automatically qualify as business income merely because the owner operates a real estate business.
Therefore, taxpayers should examine the actual nature of the letting arrangement and applicable legal provisions.
Forgetting Brought-Forward House Property Losses
Some taxpayers fail to report eligible house property losses carried forward from earlier years.
As a result, they may miss an available adjustment against future house property income.
Loss from House Property Tax Planning in Greater Noida
Many homeowners in Greater Noida purchase residential flats through home loans.
Some people use these properties for personal residence, while others rent them out to earn regular income.
However, home loan interest may exceed taxable rental income, particularly during the initial years of repayment.
For example, suppose a salaried professional owns a rented flat in Greater Noida and pays substantial home loan interest.
The property may generate a loss after deducting eligible municipal taxes, the standard deduction and home loan interest.
Under the old tax regime, the taxpayer may qualify for a set-off of up to ₹2 lakh against salary income.
However, the new tax regime restricts this benefit.
Therefore, homeowners in Greater Noida should compare both tax regimes, review their loan interest certificates and maintain accurate rental records before filing their income tax returns.
Loss from House Property Compliance Checklist
Before filing an income tax return, taxpayers should complete the following checks:
- Identify all residential and commercial properties owned during the year.
- Classify each property as self-occupied, let-out or deemed let-out.
- Calculate the gross annual value of each property.
- Deduct eligible municipal taxes actually paid by the owner.
- Calculate the standard deduction at 30%, wherever applicable.
- Obtain the home loan interest certificate.
- Apply the aggregate interest ceiling for qualifying self-occupied properties.
- Calculate income or loss from each property separately.
- Apply the relevant intra-head set-off rules.
- Check the ₹2 lakh inter-head set-off ceiling under the old tax regime.
- Review the restrictions under the new tax regime.
- Verify eligible brought-forward house property losses.
- Maintain year-wise records of carried-forward losses.
- Select the correct tax regime and report the details accurately in the income tax return.
Important Official Reference Links
Taxpayers can refer to the following official sources for updated house property loss provisions.
- Income-tax Act, 2025, as amended by Finance Act, 2026
https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf - Section 22 – Deductions from Income from House Property
https://wmstatic-prd.incometaxindia.gov.in/web/guest/w/section-22-211 - Section 110 – Carry Forward and Set-Off of Loss from House Property
https://wmstatic-prd.incometaxindia.gov.in/web/guest/w/section-110-98 - Income Tax Department – Set-Off and Carry Forward of Losses
https://www.incometaxindia.gov.in/w/set-off-and-carry-forward-of-losses-under-the-income-tax-law%E2%80%8B - Income Tax e-Filing Portal
https://www.incometax.gov.in/iec/foportal/
Conclusion
Loss from house property arises when eligible deductions exceed the taxable annual value of a property.
Homeowners may incur such losses on self-occupied or rented properties, depending on the applicable interest deduction and other statutory provisions.
Under the old tax regime, taxpayers can generally adjust up to ₹2 lakh of net house property loss against income under other heads during the year. They may also carry forward eligible unadjusted losses for up to eight subsequent tax years.
However, the new tax regime restricts these benefits, particularly for self-occupied home loan interest and house property losses.
Furthermore, the Income-tax Act, 2025 now governs the relevant provisions for Tax Year 2026–27.
Therefore, taxpayers should calculate income from each property carefully, apply the correct loss adjustment rules and compare both tax regimes before filing their returns.
With proper planning and accurate reporting, homeowners can claim eligible tax benefits while complying with Indian income tax laws.
Frequently Asked Questions (FAQs)
1. What is loss from house property?
Loss from house property arises when eligible deductions, such as home loan interest and the standard deduction, exceed the taxable annual value of the property.
2. Can I adjust house property loss against salary income?
Under the old tax regime, eligible taxpayers can generally adjust net house property loss against salary and other income up to ₹2 lakh during the year. However, the new tax regime does not allow this inter-head set-off.
3. What is the maximum house property loss allowed?
The actual loss depends on the property’s annual value and eligible deductions. Under the old tax regime, the annual inter-head set-off is generally limited to ₹2 lakh, although the total house property loss may be higher.
4. Can I carry forward house property loss for eight years?
Yes. Section 110 of the Income-tax Act, 2025 generally allows eligible unadjusted house property losses to be carried forward for up to eight subsequent tax years, subject to the applicable conditions and tax regime.
5. Can I adjust brought-forward house property loss against salary?
No. Taxpayers can generally adjust eligible brought-forward house property losses only against income from house property.
6. Can I carry forward house property loss after filing a belated return?
Under the earlier law, eligible house property losses could generally be carried forward even when taxpayers filed valid belated returns. For Tax Year 2026–27, taxpayers should check the applicable provisions of the Income-tax Act, 2025.
7. Can two houses be treated as self-occupied?
Yes. Eligible taxpayers can generally treat up to two qualifying houses as self-occupied, subject to the applicable conditions.
8. Can I claim ₹2 lakh home loan interest on each self-occupied house?
No. The ₹2 lakh ceiling generally applies to the aggregate qualifying interest deduction for self-occupied properties under the old tax regime.
9. Is house property loss allowed under the new tax regime?
Eligible interest may be deducted while calculating income from let-out property. However, the new tax regime restricts the set-off and carry-forward of house property losses and does not allow interest deduction for self-occupied property.
10. Can a rented property generate a house property loss?
Yes. A rented property may generate a loss when eligible deductions exceed its taxable annual value. However, the treatment of the loss depends on the applicable tax regime.
11. Can I carry forward house property losses from before April 2026?
Yes. Eligible losses from earlier years can continue under the Income-tax Act, 2025, subject to the original conditions and remaining carry-forward period.
12. Which sections apply to house property loss under the Income-tax Act, 2025?
Sections 108 and 109 govern the relevant set-off provisions, while Section 110 governs the carry-forward and set-off of house property losses. Section 22 covers the corresponding deductions from house property income.