The latest draft of the New Income Tax Bill, 2025, has introduced crucial clarifications under Clause 22, bringing much-needed certainty to the taxation of income from house property.
Two major provisions stand out.
Firstly, the bill explicitly confirms that a standard deduction of 30% will be available on the annual value of a residential house property, calculated after deducting municipal taxes.
Secondly, it makes clear that the tax deduction for pre-construction interest on home loans will be available not only for self-occupied properties but also for let-out ones—addressing a long-standing ambiguity.
In its earlier form, the bill did not expressly address these issues. This led the Lok Sabha Select Committee to recommend amendments for greater transparency and fairness. The committee’s report noted the importance of aligning the new provisions with the existing law to prevent disputes and ensure equitable treatment for all property owners.
Under the revised Clause 22, income from house property will be computed after:
- A flat 30% deduction from annual value (post-municipal taxes),
- Deduction of interest payable on borrowed capital for acquisition, construction, repair, or reconstruction, and
- Deduction of pre-construction interest, spread evenly over five years, including the year of completion.
For homeowners, particularly those with rented properties financed through loans, these clarifications mean assured eligibility for deductions on both principal and interest components, leading to potential tax savings. Experts believe the move will benefit a large section of taxpayers who invest in residential properties for rental income.
If you’ve purchased a house with a loan and are earning rental income from it, these new provisions ensure you can continue claiming interest-related deductions—without the grey areas that previously existed.
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Amit Sharma is the Content Editor at JurisHour. He has been writing about the Indian legal market. He has covered tax & company litigation stories from the Supreme Court, High Courts and Various Tribunals. Amit graduated from MLSU Law College with B.A.LL.B. and also holds an LL.M. from MLSU, Udaipur, Rajasthan. An Advocate in Taxation, and practised in Tribunals as well as Rajasthan High Court and pursued Masters in Constitutional Law. He started out small with little resources but a big plan to take tax legal education to the remotest locations across India and eventually to the world. His vision is to make tax related legal developments accessible to the masses.
