ITR Filing for Multiple House Properties: Income & Deduction Rules
- Rajesh Kumar Kar
- Dec 10, 2025
- 8 min read
Owning more than one house can significantly change how income tax is calculated in India, especially after the FY 2025-26 updates. Budget 2025 allows two residential properties to be treated as self-occupied without any occupation-based restrictions, while additional properties are taxed as deemed let-out. These changes simplify the annual value rules under Section 23 and influence deduction availability under Sections 24 and 80C. Filing ITR with multiple houses also requires choosing the correct form and reporting each property separately. Platforms like TaxBuddy help streamline this process by ensuring accurate property-wise reporting and updated compliance guidance.
Table of Contents
Overview of Income Rules for Multiple House Properties
When a taxpayer owns more than one residential property, income tax rules classify each property into specific categories that determine how income is computed. Under current provisions, only two properties can be treated as self-occupied, with their annual value taken as nil. Any additional property is treated as deemed let-out, even if it remains vacant throughout the year. The rules consider municipal value, standard deductions, actual rent, and interest on borrowed capital to compute the taxable income from each house.
Updated Annual Value Rules After Budget 2025
Budget 2025 introduced clarity on how annual value should be determined for properties kept vacant, partly rented, or used occasionally. The annual value of self-occupied houses continues to be nil. For deemed let-out properties, the annual value is based on expected rent—computed using municipal value, fair rent, and standard rent—whichever is higher. These rules standardise valuation to reduce disputes and mismatches between AIS and the return filed by the taxpayer.
How Self-Occupied House Property Rules Work
A self-occupied house is used by the taxpayer or family members for residential purposes. Its annual value is taken as zero, which means no rental income is computed. However, only interest deduction on home loans (up to ₹2 lakh under the old regime) is allowed. Municipal taxes and standard deduction do not apply because there is no rental income to deduct from. The taxpayer must ensure that only two properties are marked as self-occupied as per the updated rules.
Deemed Let-Out Property: Income Calculation & Treatment
If a taxpayer owns more than two properties that are not rented, additional houses automatically fall under “deemed let-out.” For these properties, a notional rental income is computed even if no actual rent is received. The calculation involves determining expected rent, deducting municipal taxes (if paid), and applying a standard deduction of 30%. Interest on loan without any upper limit can also be claimed; however, only ₹2 lakh can be set off against salary or business income in a year, and the remaining loss is carried forward.
Deductions on House Property Income Under Section 24
Section 24 allows two major deductions: municipal taxes and a 30% standard deduction on net annual value. Interest on home loans is also deductible, with limits varying between self-occupied and deemed let-out properties. This deduction reduces overall taxable income and is crucial for taxpayers with large housing loans, especially when multiple house properties are involved.
Is Interest Deduction Allowed in the New Tax Regime?
Under the new tax regime, a deduction for interest on loans for self-occupied properties is not allowed. However, for properties classified as let-out or deemed let-out, the interest deduction under Section 24(b) continues to apply. Taxpayers with high interest expenses often find the old regime more beneficial due to the larger deductions available.
How Deductions Under the Old Tax Regime Work
The old regime offers full applicability of Section 24 deductions, including the ₹2 lakh limit for self-occupied homes and unlimited deduction for deemed let-out properties. It also allows set-off of losses up to ₹2 lakh against other income, with remaining losses carried forward. For taxpayers with multiple properties, the old regime typically results in lower overall tax liability.
Principal Repayment Deduction Under Section 80C
Principal repayment on a housing loan for each eligible property can be claimed within the ₹1.5 lakh Section 80C limit. This includes repayment made during the financial year, provided the construction is complete. If the property is sold within five years of possession, the deduction is reversed and added back to taxable income.
Choosing the Correct ITR Form for Multiple House Properties
Taxpayers with more than one house must choose the correct ITR form to report each property separately. ITR-1 cannot be used if the taxpayer has more than one house property. ITR-2 is suitable for salaried taxpayers with multiple houses, while ITR-3 applies to those earning business income along with house property income. Choosing the wrong form may lead to return defects under Section 139(9).
Reporting Each House Property in the ITR: Required Details
While reporting each property, the taxpayer must provide its address, ownership share, co-ownership details, loan details, interest paid, municipal taxes paid, and actual rent received (if any). For deemed let-out properties, the expected rent must be computed and declared. Accurate reporting prevents AIS mismatches and notice triggers.
Common Errors While Filing ITR for Multiple House Properties
Errors in filing income tax returns for multiple house properties often occur because taxpayers are unsure about how each property should be classified and reported. One of the most common mistakes is incorrectly marking a property as self-occupied when it actually falls under the deemed let-out category. Since only one property can be treated as self-occupied for tax purposes, any additional property—whether used personally or kept vacant—must be reported as deemed let-out, and its notional rental value must be included in the computation. Misclassification leads to inaccurate taxable income and increases the likelihood of notices from the tax department.
Another frequent issue is the incorrect calculation of the annual value. Taxpayers sometimes skip determining the fair rental value, municipal valuation, or standard rent, which are required to compute the expected rental income for let-out or deemed let-out properties. Errors also arise when municipal taxes actually paid during the year are ignored or wrongly entered, resulting in an inflated taxable value.
Interest deduction mistakes are also widespread. Many taxpayers claim the full interest amount for multiple properties without considering the limit applicable to self-occupied houses or the correct treatment for let-out and deemed let-out properties. Missing out on pre-construction interest or claiming it incorrectly over five years is another area where errors occur.
A major problem occurs when the values reported in the ITR do not match the details available in AIS or Form 26AS. Differences in rental income, TDS on rent, or interest certificates may trigger a mismatch, leading to automated notices or the need to file a revised return. Some taxpayers also unintentionally file ITR-1, which is not permitted when more than one house property is owned. Using the wrong ITR form results in the return being treated as defective under Section 139(9), requiring correction within a deadline.
Overall, these mistakes can lead to scrutiny notices, loss of eligible deductions, or delays in refund processing. Careful classification, correct computation, and alignment with AIS and lender-issued documents help avoid such issues and ensure a smooth filing experience.
How TaxBuddy Simplifies ITR Filing for Multiple House Properties
TaxBuddy’s assisted filing ensures each house property is classified correctly, interest deductions are optimised, and the annual value is computed as per income-tax rules. The platform also auto-matches AIS data, eliminates calculation errors, and guides users on selecting the correct regime for maximum savings. This reduces the chances of incorrect claims or compliance issues.
Conclusion
Handling multiple house properties in an income tax return requires precise calculation, correct classification, and proper reporting. With updated rules and strict AIS matching, taxpayers must ensure that each property’s details—rental value, interest, and deductions—are fully compliant. Professional filing support helps avoid errors and ensures eligible tax benefits are maximised.
FAQs
Q1. How many house properties can be claimed as self-occupied for income tax purposes in FY 2025-26? From FY 2025-26 onward, taxpayers can designate up to two house properties as self-occupied. These properties are considered to have nil annual value, meaning no notional rent is added to income. This relaxation helps individuals who maintain a second home for personal use, family needs, or employment-related reasons.
Q2. What happens if I own more than two houses? If more than two houses are owned, the additional properties must be classified as deemed let-out. Even if they are vacant, their annual value (notional rent) is taxable under the head “Income from House Property.” Municipal value, fair rent, and standard rent are usually considered to arrive at this annual value.
Q3. Which ITR form should be used when the taxpayer has multiple house properties? Taxpayers with more than one house property must file ITR-2 if they do not have business income. Those with business or professional income should use ITR-3. ITR-1 cannot be used when income arises from multiple house properties.
Q4. What deductions can be claimed on house property income? Taxpayers can claim: • 30% standard deduction on net annual value for repairs and maintenance (no bills required) • Interest deduction under Section 24(b) up to ₹2 lakh for self-occupied properties • Full interest deduction (subject to set-off limits) for deemed let-out properties • Principal repayment under Section 80C up to ₹1.5 lakh, including stamp duty and registration, once in the year of payment.
Q5. Does TaxBuddy help with filing ITR for multiple house properties? Yes. TaxBuddy offers AI-driven computation, auto-classification of property type, accurate interest deduction calculations, and expert review to ensure compliance with the latest rules, including the two-property self-occupied benefit.
Q6. How is notional rent calculated for a deemed let-out property? Notional rent is based on the expected reasonable rental value of the property. The Income Tax Department usually considers: • Municipal value • Fair rent of similar properties • Standard rent, where applicable The higher of municipal value or fair rent, capped at standard rent (if applicable), becomes the basis. From this, repairs deduction and interest deduction are applied.
Q7. Can interest on multiple home loans be claimed if a taxpayer owns several properties? Yes. Interest deduction is allowed for each loan linked to a property. For self-occupied properties, the combined limit remains ₹2 lakh. For deemed let-out properties, the full interest is deductible, but the overall loss set-off from house property is limited to ₹2 lakh per year. Excess loss can be carried forward for eight years.
Q8. What if the second property is not used by the taxpayer but remains vacant? A vacant second home can still be treated as self-occupied if the taxpayer chooses to classify it as such within the two-property limit. After two properties, any additional vacant units become deemed let-out, attracting notional rent tax.
Q9. Is rental income clubbed if co-owned properties are let out? For co-owned properties, rental income is divided proportionately based on ownership share. Each co-owner reports their respective share, claims their interest deduction, and applies Section 24(b) and 30% standard deduction individually.
Q10. Can a taxpayer claim both HRA and home loan benefits for house property? Yes, under specific conditions. A taxpayer can claim HRA while also claiming home loan benefits if the rented home and the owned home are in different cities or if the owned home is unusable due to job location constraints. Proper justification should be available in case of an inquiry.
Q11. How is family-owned property treated if only one member pays the loan? Income and deductions are based on ownership, not payment alone. A person paying the loan but not listed as an owner cannot claim benefits. Conversely, a co-owner can claim deductions only up to their share of repayment and ownership, provided they are also co-borrowers on the loan.
Q12. What are the consequences of not reporting additional properties in the ITR? Non-reporting can lead to: • Mismatch with AIS/TIS, which captures property-related transactions • Tax notices for under-reporting • Interest under Sections 234B and 234C • Penalties under Section 270A for misreporting Accurate disclosure ensures compliance and avoids scrutiny. Filing through platforms like TaxBuddy minimises such risks by ensuring complete and accurate reporting.
