Income from two house properties under the new regime, one let for part of the year

Assumptions

1. Only municipal values are given, so the expected rent of each house is its municipal value. The municipal taxes (10% and 8% of municipal value) were paid by Mr. Raman during the year.
2. Of the ₹2,00,000 repaid to SBI, the ₹90,000 that related to interest is the interest payable for tax year 2026-27; the ₹1,10,000 of principal is not a deduction from house property income.
3. No principal was repaid before construction was completed, so the full ₹10,00,000 carried interest at 12% in the pre-construction period.
4. Income-tax is computed under the default regime of section 202(1).

Status of each house

• House-1 (Delhi) is let out for the whole year.
• House-2 (Jaipur) was occupied by him until 30/11/2026 and let from 01/12/2026. A house is treated as self-occupied (annual value nil) only if it is not actually let at any time in the year (section 21(7)(b)). Because it was let for four months, House-2 is a let-out house for the whole year, and its annual value is the higher of the expected rent for the year and the rent actually received.
• Repairs actually spent (₹20,000 and ₹70,000) are not deducted: the 30% standard deduction covers all such expenses.
• Under the default regime, interest is still deductible for a let-out house; for a self-occupied house only the current year's interest under section 22(1)(b) is disallowed (section 202(2)(a)(v)).

Pre-construction interest on House-2 (section 22(1)(c))

The loan was taken on 01/08/2024 and House-2 was completed on 01/03/2026, in tax year 2025-26. The pre-construction period runs from 01/08/2024 to 31/03/2025, the end of the year before the year of completion: 8 months.

Interest for that period = ₹10,00,000 × 12% × 8/12 = ₹80,000, deductible in five equal instalments of ₹16,000 from tax year 2025-26; tax year 2026-27 takes the second instalment. No part of it is shown as allowed under any other provision, so it is not reduced first (section 22(3)).

Computation of income from house property for tax year 2026-27

Total income under the head Income from house property = ₹2,35,200 + ₹9,920 = ₹2,45,120.

Notes

1. Had House-2 been treated as self-occupied for the eight months, its annual value would have been nil and, under the default regime, no current-year interest would have been deductible (section 202(2)(a)(v) removes only the section 22(1)(b) deduction; read as written, the ₹16,000 pre-construction instalment under section 22(1)(c) would still be allowed, though on the other reading it too is lost); the Act does not split a year in this way, because a house let at any time in the year is outside section 21(6).
2. Had he not let House-2 after his transfer to Baroda, its annual value would still have been nil (section 21(6): the owner cannot occupy it because of his employment elsewhere), with no deduction under the default regime for the current year's interest (section 202(2)(a)(v)); the pre-construction instalment is treated as in note 1.