by Income from house property is computed after determining the annual value of the property and allowing deductions permitted under the Income tax Act, 2025. Interest on borrowed capital is an important deduction where money is borrowed for acquiring, constructing, repairing, renewing or reconstructing the property. The computation becomes slightly different when a property is jointly owned by two or more persons. In such cases, the income and eligible interest deduction are generally apportioned according to the definite and ascertainable ownership share of each co owner, subject to the applicable provisions.
1. Interest on Borrowed Capital
Interest paid or payable on borrowed capital used for acquiring, constructing, repairing, renewing or reconstructing a house property is allowed as a deduction, subject to the conditions and limits prescribed under the Income tax Act, 2025.
The borrowing should have a connection with the house property. Interest on a personal loan having no connection with acquisition, construction, repair, renewal or reconstruction of the property is generally not eligible as a deduction under the house property provisions.
Formula
Income from House Property = Annual Value − Eligible Deductions
The deductions generally include:
30% of Annual Value
Interest on Borrowed Capital
For a let out property, the eligible interest is generally allowed according to the applicable provisions. For a self occupied property, specific monetary limits and conditions apply.
2. Pre-Construction Interest
Interest relating to the period before the acquisition or completion of construction is treated separately. The eligible pre construction interest is accumulated and allowed in five equal annual instalments, beginning from the tax year in which the property is acquired or construction is completed.
Example
Pre construction interest = ₹2,00,000
Annual instalment = ₹2,00,000 ÷ 5 = ₹40,000
Therefore, ₹40,000 can be claimed each year, subject to the applicable provisions and limits.
3. Property Owned by Co-owners
When a house property is jointly owned by two or more persons and their respective shares are definite and ascertainable, each co owner is generally assessed separately in respect of his or her share of income from the property.
For example, if Mr. A and Mr. B own a property equally, each has a 50% share. The annual value, applicable deductions and eligible interest are apportioned according to their respective ownership shares.
Example
Suppose a property is owned equally by A and B.
Annual Value = ₹6,00,000
Interest on borrowed capital = ₹2,00,000
Each co owner’s share:
| Particulars | A | B |
|---|---|---|
| Share in property | 50% | 50% |
| Annual Value | ₹3,00,000 | ₹3,00,000 |
| 30% Standard Deduction | ₹90,000 | ₹90,000 |
| Interest on Borrowed Capital | ₹1,00,000 | ₹1,00,000 |
Therefore, subject to the applicable rules, the income from house property is computed separately in the hands of A and B.
4. Co-owners with Unequal Shares
Where ownership shares are different, income and eligible deductions are divided according to the actual ownership ratio.
Suppose A owns 60% and B owns 40% of a property having annual value of ₹5,00,000.
A’s share of annual value:
₹5,00,000 × 60% = ₹3,00,000
B’s share:
₹5,00,000 × 40% = ₹2,00,000
Similarly, eligible interest on borrowed capital is divided according to their respective shares, provided the borrowing and payment satisfy the applicable conditions.
5. Computation Format
The computation for each co owner can be presented as:
Gross Annual Value
Less: Municipal Taxes, where allowable
= Net Annual Value
Less: 30% Standard Deduction
Less: Eligible Interest on Borrowed Capital
= Income from House Property
Each co owner includes his or her share of the resulting income in the respective total income.
