Salary & House Property
Salary and house property are two important heads of income under the Income-tax Act, 2025. Sections 15 and 19 deal with the basic charge and deductions relating to salary income, while Sections 20 and 22 deal with the charge and deductions relating to income from house property.
These provisions are particularly useful for salaried individuals, homeowners, landlords and students learning the computation of total income.
U/s 15 – Salaries
“Salaries.”
Section 15 provides:
“The following income shall be chargeable to income-tax under the head ‘Salaries’—”
It covers:
(a) salary due from an employer to an assessee in the tax year, whether paid or not;
(b) salary paid or allowed during the tax year by or on behalf of an employer, even if it was not due or was paid before it became due; and
(c) arrears of salary received during the tax year, where the same was not already charged to tax in an earlier tax year.
The section also provides that employer includes former employer.
If advance salary has already been included in total income in an earlier tax year, it is not taxed again merely because it becomes due later.
An important point is that salary, bonus, commission or remuneration received by a partner from a firm is not treated as salary for this section.
Easy example
Suppose an employee's salary for March is due in March but is actually paid in April.
The salary is considered based on the charging rules of Section 15 for the relevant tax year. Salary is therefore not determined only by looking at the date on which money enters the bank account.
Remember the three important situations under Section 15:
Salary due → taxable
Salary paid in advance → taxable
Arrears not taxed earlier → taxable when received
U/s 19 – Deductions from Salaries
“Deductions from salaries.”
Section 19 provides the deductions that may be made while computing income chargeable under the head Salaries.
The section provides a detailed table covering specified payments and receipts.
Important items include:
tax on employment/professional tax, where applicable;
standard deduction;
specified gratuity;
specified pension and commutation of pension;
eligible retrenchment compensation;
voluntary retirement compensation subject to prescribed conditions; and
eligible leave encashment.
Standard Deduction
One of the most important provisions for individual taxpayers is the standard deduction.
Under Section 19:
₹75,000 or salary, whichever is less, where income-tax is computed under Section 202(1); and
₹50,000 or salary, whichever is less, in other cases.
The section also contains detailed conditions for gratuity, pension, retrenchment compensation, voluntary retirement and leave salary.
Easy understanding
If an employee has salary income, the taxable salary is not necessarily equal to the gross salary shown by the employer.
The computation broadly follows:
Gross Salary
Less: Eligible deductions under Section 19
= Income chargeable under the head Salaries
Important highlight
Section 19 should not be confused with deductions under Chapter VIII.
Section 19 deals with deductions while computing salary income, whereas deductions under Chapter VIII are considered separately while arriving at total income.
U/s 20 – Income from House Property
“Income from house property.”
Section 20 provides:
“The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee shall be chargeable to income-tax under the head ‘Income from house property’.”
However, this provision does not apply to the portion of the property occupied by the assessee for their own business or profession where the profits of that business or profession are chargeable to income-tax.
In simple words
Three basic points should be checked:
1. There must be a building or land attached to the building.
2. The assessee should be the owner.
3. The property should not be used by the assessee for their own taxable business or profession.
The tax is based on the annual value of the property, not simply on the amount of rent actually received.
The determination of annual value is dealt with separately under Section 21.
Example
A person owns a residential flat and lets it out on rent.
The income is generally considered under the head Income from House Property, subject to the provisions of the Act.
But if the owner uses a portion of the property for their own business or profession, the corresponding portion is outside Section 20 where the business profits are chargeable to tax.
U/s 22 – Deductions from Income from House Property
“Deductions from income from house property.”
After determining the annual value under Section 21, Section 22 provides the deductions available while computing income from house property.
The important deductions are:
1. Standard deduction – 30%
A deduction of 30% of the annual value is allowed.
This is available irrespective of the actual amount spent by the owner on repairs and maintenance, subject to the provisions of the Act.
2. Interest on borrowed capital
Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the eligible interest payable on such capital is deductible.
3. Pre-construction / prior-period interest
Interest relating to the period before the tax year in which the property was acquired or constructed may be allowed in five equal instalments, beginning from the relevant tax year and continuing for the following four tax years.
For specified self-occupied properties, Section 22 provides a deduction limit of ₹2,00,000, subject to the conditions prescribed in the section. In other specified cases, the limit is ₹30,000.
Basic computation
A simple way to understand house-property computation is:
Annual Value
Less: Municipal/local authority taxes actually paid, where applicable
= Net Annual Value
Less: 30% standard deduction
Less: eligible interest on borrowed capital
= Income from House Property
The determination of annual value itself is governed by Section 21.
Important Highlights – Quick Revision
U/s 15 → Salary chargeability
Determines what salary income is taxable under the head Salaries.
U/s 19 → Salary deductions
Provides specified deductions, including the standard deduction and specified retirement-related payments.
U/s 20 → House property chargeability
Annual value of owned buildings and appurtenant land is generally taxable under the head Income from House Property.
U/s 22 → House property deductions
Provides the 30% standard deduction and eligible interest deduction on borrowed capital.
Remember this sequence
Salary:
U/s 15 → Salary income
U/s 19 → Salary deductions
House Property:
U/s 20 → Chargeability
U/s 21 → Annual Value
U/s 22 → Deductions
This makes the house-property computation particularly easy to remember.
Questions Should Remember
1. Is salary taxable only when it is received?
No. Salary may be taxable when it becomes due, when it is paid in advance, or when eligible arrears are received and were not taxed earlier. U/s 15 is therefore important.
2. What is the standard deduction from salary under the new Act?
Section 19 provides ₹75,000 or salary, whichever is less, where tax is computed under Section 202(1), and ₹50,000 or salary, whichever is less, in other cases.
3. Is rent received always taxable under House Property?
Not automatically. The head of income depends upon the nature of the activity and applicable provisions. Section 20 provides the basic charge for income from house property.
4. What is the standard deduction for house property?
Section 22 provides a deduction of 30% of annual value.
5. Can home-loan interest be deducted?
Eligible interest on borrowed capital can be deducted under Section 22, subject to the conditions and limits prescribed in the section.
6. Which section determines annual value?
Section 21 determines the annual value, while Section 22 provides the deductions from income from house property.
The easiest way to remember these provisions is:
U/s 15 – What salary is taxable?
U/s 19 – What deductions are available from salary?
U/s 20 – When is property income taxable under House Property?
U/s 21 – How is annual value determined?
U/s 22 – What deductions are available from house-property income?
For Tax Year 2026-27 onwards, these provisions should be read with the Income-tax Act, 2025 and the applicable Rules, notifications and amendments.
Disclaimer: This article is prepared for educational and study purposes. For actual tax computation or compliance, the applicable provisions of the Income-tax Act, 2025, Rules, notifications, circulars and amendments should be referred to.