How to Report Income from Two House Properties in ITR
- Dipali Waghmode
- 5 days ago
- 8 min read
The Income Tax Act, 1961, defines clear provisions for reporting income from multiple house properties. With the latest updates from Budget 2025, taxpayers can now claim up to two self-occupied houses as nil income, simplifying compliance and filing. Understanding the correct ITR form, method of computation, and available deductions ensures accurate reporting and helps avoid notices or penalties.
Table of Contents
Understanding Income from House Property under the Income Tax Act
Income from house property refers to any income earned from owning a building or land appurtenant to it, such as rent or deemed rent. Under the Income Tax Act, 1961, this income is taxable under the head “Income from House Property.” The taxability depends on whether the property is self-occupied, let-out, or deemed to be let-out. Even if a taxpayer owns multiple properties, only two can be considered self-occupied from FY 2024-25 onwards (as per Budget 2025 updates). The rest will be treated as deemed let-out, and notional rent must be calculated on them.
Applicable ITR Forms for Reporting Two House Properties
The choice of ITR form depends on the type of income and the total number of properties owned. If the taxpayer owns one or two properties and earns only salary, pension, or interest income, they can use ITR-1 (Sahaj). However, if income arises from more than two house properties or there is capital gain or business income, ITR-2 must be used. ITR-2 also allows detailed reporting for jointly owned or let-out properties where rental income, interest on housing loans, and municipal taxes need to be itemized separately.
How to Report Income from Two House Properties in ITR
When filing returns, each house property must be reported under the “Income from House Property” section. For self-occupied properties, the annual value is taken as nil, while for let-out or deemed let-out properties, the gross annual value (rent received or receivable) must be declared. From this, deductions like municipal taxes and 30% standard deduction are applied. Additionally, interest paid on home loans is deductible under Section 24(b). Accurate reporting ensures proper reflection in the Annual Information Statement (AIS) and avoids mismatch notices.
Budget 2025 Updates: Claiming Two Self-Occupied Houses
Earlier, only one house could be claimed as self-occupied without incurring notional rent on the second. However, Budget 2025 allows taxpayers to declare two houses as self-occupied if they are not rented out. This provides major relief for individuals owning a family home and another property used by parents or children. Beyond two properties, any additional one will be treated as deemed let-out. This update significantly reduces the tax burden for salaried individuals and joint homeowners.
Income Calculation and Deductions under Section 24(b)
Section 24(b) provides deductions on interest paid for housing loans. For self-occupied properties, the maximum deduction allowed is ₹2 lakh per financial year, while for let-out properties, the entire interest amount can be claimed without limit. If the construction or purchase is not completed within five years from the end of the financial year in which the loan was taken, the deduction is restricted to ₹30,000. Additionally, pre-construction interest can be claimed in five equal installments starting from the year of possession or completion.
Is Deduction under Section 24(b) Allowed in the New Tax Regime?
Under the new tax regime introduced in Budget 2025, deductions under Section 24(b) for self-occupied properties are not available. However, taxpayers can still claim deductions on interest paid for let-out properties, as these are treated as income-generating assets. The new regime offers lower tax rates but eliminates most exemptions and deductions. Therefore, taxpayers should calculate total tax liability under both regimes to determine which provides better savings.
Example: Reporting Income from Two Houses (Practical Illustration)
Consider a taxpayer who owns two properties — one self-occupied and another rented out.
Property A (Self-Occupied): Annual Value = Nil; Interest on Loan = ₹1,50,000
Property B (Rented): Rent Received = ₹3,60,000; Municipal Tax = ₹10,000; Interest on Loan = ₹2,40,000
Computation:
Net Annual Value (B): ₹3,50,000 (₹3,60,000 - ₹10,000)
Less: Standard Deduction (30%) = ₹1,05,000
Less: Interest on Loan = ₹2,40,000 Income from Property B = ₹5,000 Since Property A is self-occupied, loss from house property = ₹(1,50,000). Total Income from House Property = ₹(1,45,000) (loss can be set off against other income up to ₹2 lakh).
Step-by-Step Reporting Process and Best Practices
The process of reporting income from house property in the Income Tax Return (ITR) involves careful documentation and accurate data entry to ensure compliance and maximize available deductions. The first step is to collect all relevant property details such as the complete address, ownership percentage, and information about any housing loans taken. These details are crucial because deductions and taxable value are computed based on ownership share and the purpose of the property—whether it is self-occupied, rented, or deemed to be let out.
Next, obtain an interest certificate from your lender for each property you own. This certificate provides a breakup of the total principal and interest paid during the financial year. It helps in correctly claiming deductions under Section 24(b) of the Income Tax Act for interest on borrowed capital. In the case of joint ownership, ensure that the certificate reflects each co-owner’s share in the loan repayment.
The following step is to verify the total annual rent received for rented or let-out properties and record the municipal taxes paid to the local authorities. These figures are necessary to calculate the Net Annual Value (NAV), which forms the basis for determining taxable income from the property. Rent receipts, municipal tax payment proofs, and rent agreements should be preserved as supporting evidence in case of scrutiny.
Once all details are verified, enter them in the “Income from House Property” schedule in your ITR form. The ITR requires inputs such as the property type, address, ownership percentage, gross annual rent, municipal taxes, interest on loan, and co-owner details (if applicable). Ensure that every entry aligns with your loan statements and Form 26AS to prevent discrepancies.
After entering the data, apply the standard deduction of 30 per cent on the Net Annual Value (NAV). This deduction is available for all rented or let-out properties, irrespective of actual expenses incurred on maintenance or repairs. Additionally, claim the interest deduction under Section 24(b) based on the amount mentioned in the lender’s interest certificate. For self-occupied properties, the deduction limit is ₹2 lakh per financial year, while there is no upper limit for rented properties.
It is important to validate all entries against your Form 26AS, Annual Information Statement (AIS), and loan repayment records to ensure consistency. Any mismatch between reported data and information in AIS or Form 26AS can trigger an income tax notice or delay the processing of your return.
To make this process easier and more accurate, taxpayers can use digital tools and platforms like TaxBuddy. TaxBuddy automatically imports property and loan data, computes eligible deductions, and checks for compliance issues. The platform ensures that your income from house property is reported correctly while optimizing tax benefits under Sections 24(b) and 80C. This automation minimizes manual errors and provides a seamless, error-free filing experience for property owners.
Why Reporting Accurately Matters
Accurate reporting of house property income ensures compliance and avoids penalties. The Income Tax Department cross-verifies reported data with AIS, Form 26AS, and lender records. Any mismatch or omission, such as unreported rent or incorrect interest claim, can trigger notices. Proper reporting also helps taxpayers utilize loss from house property effectively against other income heads, reducing total tax liability.
Simplified Filing through TaxBuddy
TaxBuddy simplifies property income reporting by automating deduction calculations and ensuring compliance with the latest tax laws. The platform identifies whether the taxpayer falls under the old or new regime and auto-applies eligible deductions, including Section 24(b) benefits. For those with multiple properties, TaxBuddy’s expert-assisted plans ensure error-free filing with maximum tax efficiency.
Conclusion
Understanding how to report income from house property correctly can significantly impact tax savings. With the new rule allowing two self-occupied houses, taxpayers enjoy greater flexibility while filing. However, compliance with conditions under Section 24(b) and correct reporting of let-out properties remain crucial. Using professional tax-filing platforms like TaxBuddy ensures that all eligible deductions are claimed, and errors are eliminated for a smoother filing experience.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. How many house properties can be claimed as self-occupied? Starting from FY 2024-25, taxpayers can declare up to two properties as self-occupied if neither is rented out. This change allows individuals to avoid paying tax on notional rent for a second property used by family members or kept vacant. Any additional properties beyond two are treated as “deemed let-out” and taxed accordingly.
Q2. Which ITR form should be used for reporting income from two house properties? If you own more than one house or have rental income, you must use ITR-2. The simpler ITR-1 (Sahaj) form is only applicable if you have income from a single house property. ITR-2 also allows you to report co-owned properties, home loan interest, and loss set-off details accurately.
Q3. Can interest on home loan be claimed for both houses? Yes, interest on housing loans can be claimed for both properties under Section 24(b). The total deduction across all self-occupied properties cannot exceed ₹2 lakh per financial year. For let-out properties, there is no upper limit, but the set-off against other income is capped at ₹2 lakh annually.
Q4. What happens if construction is not completed within five years? If the property’s construction is not completed within five years from the end of the financial year in which the loan was taken, the deduction for home loan interest is limited to ₹30,000 per year instead of ₹2 lakh. This rule applies to self-occupied properties only.
Q5. Is Section 24(b) deduction allowed under the new regime? Under the new tax regime, taxpayers cannot claim deductions for home loan interest on self-occupied properties. However, the benefit continues for rented or let-out properties, where actual interest paid can be deducted while computing taxable income.
Q6. Can loss from house property be adjusted against other income? Yes, a maximum of ₹2 lakh of loss from house property can be set off against other heads of income such as salary, business, or capital gains within the same financial year. Any remaining loss can be carried forward for up to eight assessment years and adjusted against future house property income only.
Q7. What is the tax treatment of let-out property? Income from let-out property is taxed under the head “Income from House Property.” The taxable amount is calculated by taking the annual rent received (or expected rent), subtracting municipal taxes paid, and then applying a 30% standard deduction along with home loan interest deduction under Section 24(b).
Q8. Is pre-construction interest deductible? Yes, pre-construction interest is deductible in five equal annual installments, beginning from the year in which construction is completed or possession is obtained. This benefit is included within the overall limit of ₹2 lakh for self-occupied properties and can significantly reduce taxable income over time.
Q9. How to report co-owned property in ITR? Each co-owner must report their respective share of income, deductions, and home loan interest in proportion to their ownership share. For instance, if two owners share ownership equally, each reports 50% of the rent received, loan interest, and municipal taxes. Proper documentation helps ensure smooth assessment.
Q10. Can deemed rent be applied to a second self-occupied property? No. Following the amendment introduced in Budget 2025, taxpayers can declare two properties as self-occupied without having to report any notional rent. This benefit relieves homeowners who own a second home used for family purposes or kept vacant from unnecessary taxation.
Q11. What are common mistakes in reporting property income? Common mistakes include failing to claim municipal taxes paid, omitting pre-construction interest, misclassifying self-occupied and rented properties, or entering incorrect loan interest values. Another frequent error is using the wrong ITR form, which may result in a defective return under Section 139(9).
Q12. How can TaxBuddy help in filing property income? TaxBuddy simplifies the process by automatically identifying eligible deductions under Sections 24(b) and 80C, calculating accurate taxable income, and ensuring compliance with the chosen tax regime. It also assists with co-owned property reporting and rental income entries. Expert-assisted filing ensures precision, timely submission, and peace of mind for property owners.
Comments