Revised Tax Bill 2025: Key Changes to House Property Income Rules
The revised Income Tax Bill, 2025, has introduced important clarifications for “Income from House Property” that will affect homeowners, particularly those with rental properties. Clause 22 of the new bill resolves two long-standing ambiguities, ensuring the new tax law aligns with existing practices.
1. Standard Deduction Clarification
The new bill clarifies that the 30% standard deduction will be applied to the net annual value of a property. This net value is calculated after deducting municipal taxes from the gross annual value. The initial draft of the bill had been unclear on this point, causing concern that the deduction might be applied to the gross value, which would have resulted in a higher tax burden. The Select Committee recommended this change to maintain fairness and consistency with current tax laws.
2. Pre-Construction Interest Deduction for Rental Properties
The revised bill extends the deduction for pre-construction interest on home loans to both self-occupied and let-out properties. The earlier draft had proposed limiting this benefit to only self-occupied properties. This change restores a benefit that homeowners currently enjoy, ensuring that individuals who rent out their properties can still claim this deduction in five equal annual installments.
What This Means for Homeowners
These clarifications are a win for homeowners. If you have a home loan for a property, whether you live in it or rent it out, you can continue to claim deductions for:
- Municipal taxes paid
- A 30% standard deduction on the net annual value
- Interest on your home loan, including pre-construction interest spread over five years.
These changes provide clarity and prevent potential disputes, making the computation of “Income from House Property” more straightforward for taxpayers.