Income Tax Bill 2025: Income from house property taxation related 2key amendments suggested by select committee, know the impact

The Lok Sabha Select Committee has recommended two key amendments regarding tax deductions on income from house property. One of the key amendments proposed by the Committee is to allow a standard deduction of 30% from the gross annual value (GAV) of a house property after deducting municipal taxes. The second significant amendment they recommended is to allow a deduction of home loan interest when calculating income from rented (let-out) house properties.

What did the Select Committee recommend?

According to the press release dated July 21, 2025, the Select Committee of the Lok Sabha recommended:

Deductions from income from house property (Clause 22, 22(1), and 22(2)):

The Committee, after deliberations on Clause 22, identified the need to clarify the computation of deductions to enhance fairness and transparency for property owners. The Committee, therefore, recommended two key amendments:

1. Firstly, in Clause 22(1)(a), to explicitly state that the standard 30% deduction be computed on the annual value after deducting municipal taxes.
2. Secondly, in Clause 22(2), to ensure that the deduction for pre-construction interest is available for let-out properties in addition to self-occupied ones, aligning it with the existing Act.

What does this mean for homeowners?

If you are a homeowner who bought a residential property by taking a home loan from a financial institution, you can claim some tax deductions on both the principal and the interest components of the loan. The amendments proposed by the Select Committee relate to a situation where you have where you have put your house bought on loan on rent (let-out).According to the press release, these amendments were there under the Income Tax Act, 1961 but for some reason, the Income Tax Bill, 2025 didn’t clearly mention them, and so the committee recommended including them.

Experts explains: “A let-out house property is one that is rented out or leased to another party. The rental income received from such a property is taxable under the heads of income – “Income from House Property.” Individuals can claim tax deductions on the municipal taxes paid, standard deduction (30% of the net annual value), and interest on home loans.”

Expert, says:

• Under the current Income Tax Act, 1961, homeowners can claim deductions for municipal taxes, a 30% standard deduction (post municipal taxes), and interest on home loans, including a pre-construction interest. Loss from house property can be set off against other income up to Rs 2 lakh in the year of loss, with the balance carried forward for 8 years.
• The New Direct Tax Bill, 2025 retains similar provisions but is unclear on two aspects: whether calculation of the 30% deduction is after municipal taxes and availability of deduction of pre-construction interest for let-out properties. The Lok Sabha Select Committee, in its July 21, 2025 report, has recommended clarifying both these aspects. Adoption of these would align the new regime with existing provisions.

The final value that arrives is your income from the house property. Soni says: “This is taxable at the slab rate applicable to your income.”

Experts says: “The Select Committee desires to enhance fairness and transparency for property owners by explicitly mentioning them as part of the clauses. The Central Government is expected to consider them and make it part of the Income Tax Bill 2025. If so, it will not only benefit the taxpayers in the form of clear guidelines for deductions, but also enhance clarification for the tax administration for implementation. Given that minimal tinkering will ensure smooth transition, less confusion/dispute in interpretation and computing the income under this head.”