11-08-2025
Latest version of new tax bill, 2025 clarifies two key laws on income from house property
Here's what the new version of the bill states:
(a) 30% of the annual value as determined under section 21;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital;
(c) where the capital referred to in clause (b) is borrowed during any period prior to the tax year in which the property has been acquired or constructed, the amount of any interest payable for the said prior period in five equal instalments for the said tax year and for each of the four immediately succeeding tax years
What does this mean for homeowners?
Under the current Income Tax Act, 1961, homeowners can claim deductions for municipal taxes, a 30% standard deduction (post municipal taxes), and interest on home loans, including a pre-construction interest. Loss from house property can be set off against other income up to Rs 2 lakh in the year of loss, with the balance carried forward for 8 years.
The New Direct Tax Bill, 2025 retains similar provisions but is unclear on two aspects: whether calculation of the 30% deduction is after municipal taxes and availability of deduction of pre-construction interest for let-out properties. The Lok Sabha Select Committee, in its July 21, 2025 report, has recommended clarifying both these aspects. Adoption of these would align the new regime with existing provisions.
Particulars
Amount (Rs)
Gross Annual Value of the house property
XXX
(less) Municipal Tax
(XX)
Net Annual Value of the house property
XXX
(Less) Deductions under Section 24:
Standard deduction@30%
Interest paid on home loan
(XXX)
Income from house property
XXX
Clause 22 of the latest version of the New Income Tax Bill, 2025 has clarified two key laws relating to taxation of income from house property . The first clarification is regarding standard deduction of 30% from the annual value of a residential house property . The second clarification is about availability of tax deduction for pre-construction interest for home loan taken for construction of a the earlier version of the bill, this tax deduction for pre-construction interest and standard deduction were not explicitly clarified. Therefore, the Lok Sabha Select Committee had said:'The Committee, after deliberations on Clause 22, identified the need to clarify the computation of deductions to enhance fairness and transparency for property owners. The Committee, recommend two key amendments: firstly, in Clause 22(1)(a), to explicitly state that the standard 30% deduction is computed on the annual value after deducting municipal taxes; and secondly, in Clause 22(2), to ensure the deduction for pre-construction interest is available for let-out properties in addition to selfoccupied ones, aligning it with the existing Act. Further, the Committee accept the remaining provisions of Clause 22 as proposed in the Bill.'22. (1) The income under the head 'Income from house property' shall be computed after making the following deductions:––If you are a homeowner who bought a residential property by taking a home loan from a financial institution, you can claim some tax deductions on both the principal and the interest components of the loan. The amendments proposed by the Select Committee relate to a situation where you have put your house bought on loan on rent (let-out).Chartered Accountant Abhishek Soni, co-founder, Tax2Win explains: 'A let-out house property is one that is rented out or leased to another party. The rental income received from such a property is taxable under the heads of income – "Income from House Property." Individuals can claim tax deductions on the municipal taxes paid, standard deduction (30% of the net annual value), and interest on home loans.'Ashish Agrawal, Partner, Dhruva Advisors LLP, says:Source: Tax2Win
