Section 20 of the Income-tax Act, 2025 — Income from House Property (the Charge)

In plain language

What Section 20 actually says

Section 20 is the "charging section" for house property income. It fixes the very first question in this head of income: what is taxed and on whom. In plain words, it says the annual value of any building or land attached to it (land appurtenant thereto), of which you are the owner, is taxable under the head "Income from house property" — with one carve-out: any part of the property you use for your own business or profession (whose profits are already taxed as business income) is left out.

• The thing taxed is "annual value," not rent. The law taxes the earning capacity of the building, not merely the cash rent. That is why a vacant second house or a property that could be let can still attract tax.
• You must be the "owner." Legal or beneficial ownership matters — not who lives there. A tenant, licensee, or caretaker is not charged under this head.
• Only buildings and land attached to them. Vacant plots with no building are not covered here (their income is usually taxed as "other sources" or business income).

Who does it apply to

• Any owner — individual, HUF, firm, company, LLP, trust — who owns a building/house.
• Both residential and commercial buildings — a rented shop, office, godown, or flat all fall here (except the part you occupy for your own business).
• Deemed owners too — Section 25 (old Section 27) treats certain persons as owners even without a registered title, e.g. a property gifted to your spouse or minor child without adequate consideration, or a long lease of 12 years or more.

Key conditions and the self-occupied rule

Section 20 only creates the charge; the amount is worked out under the following sections. But three practical rules flow directly from the charge:

• Self-occupied houses: Up to two houses that you occupy yourself (or keep vacant because you live elsewhere for work) can be treated with a nil annual value — so no tax on notional rent.
• More than two houses: From the third house onward, if not actually let, it is treated as deemed let-out and taxed on its reasonable expected rent.
• Own business portion excluded: If you run your shop from your own building, that portion is not charged here — it is dealt with as business income.

How it interacts with related sections

• Section 21 (annual value): Fixes the figure — the higher of expected/municipal rent or actual rent received, less municipal taxes paid.
• Section 22 (deductions): Allows the flat 30% standard deduction on Net Annual Value and interest on borrowed capital (home-loan interest), capped at ₹2,00,000 for self-occupied property.
• Section 23 (arrears/unrealised rent): Taxes recovered arrears with a 30% deduction.
• Section 24 (co-owners): Splits the income between co-owners in their ownership share.

Practical implications for taxpayers

• Owning a house has a tax footprint even if you never rent it out — because of the deemed let-out rule beyond two self-occupied houses.
• Keep municipal tax receipts and home-loan interest certificates — they directly reduce the taxable amount under Sections 21 and 22.
• Business-use portions are separated out, so mixed-use buildings need careful apportionment.
• The new Act (2025) largely re-enacts the old Section 22 of the Income-tax Act, 1961 — the substance is unchanged, only the numbering and drafting are modernised.