Sub-section (1) fixes the charge: the annual value of property consisting of any buildings or lands appurtenant to them, owned by the assessee, is chargeable to income-tax under the head "Income from house property". Two things carry the charge — ownership by the assessee, and the property being buildings or land appurtenant to buildings. Sub-section (2) carves out the portions of that property which the assessee occupies for his own business or profession, provided the profits of that business or profession are themselves chargeable to income-tax; those portions fall outside sub-section (1) altogether. The section says nothing about how annual value is arrived at or what may be deducted from it.
Why it is there
The section identifies the owner, not the occupier or the recipient of rent, as the person taxed on house property, and taxes a notional measure — annual value — rather than actual receipts. The sub-section (2) carve-out prevents the same premises being taxed twice, once as house property and again through the business profits they help produce.
Who it applies to
An assessee who owns buildings or lands appurtenant to buildings
An assessee occupying part of his own property for his business or profession
What this means in practice
If you own the building you are assessed on its annual value under this head whether or not you receive rent, and whether or not you occupy it. Where you use part of the premises for your own business or profession and those profits are taxed, that part is excluded — but only that part, so a building split between own-business use and letting has to be apportioned. The section is the gateway only: the annual value itself comes from section 21 and the deductions from section 22.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An individual owns a three-storey building, occupies the ground floor for his own profession the profits of which are chargeable to tax, and lets the two upper floors. Sub-section (2) takes the ground floor out of sub-section (1) altogether, so only the annual value of the let portions is charged under “Income from house property”. If instead he let the ground floor to a firm which ran its business there, the exclusion would not apply — the occupation would not be his own — and the annual value of all three floors would be chargeable. And if the upper floors stood empty all year and he received nothing, the charge would still be on their annual value, because sub-section (1) taxes the annual value of the property in the hands of its owner, not the rent.
Where you meet this section
In the return of income, where property income is offered under the head “Income from house property”, and in an assessment order that disputes whether a portion of premises is occupied by the assessee for his own business or profession. The section names no form and no authority — it settles ownership and the head only; how annual value is arrived at and what may be deducted come from other provisions.
The words themselves
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".
Section 20(1), Income-tax Act, 2025.
What people get wrong
Reading the charge as falling on rent received. The section charges the annual value of the property and fastens it on the owner, so an owner who receives nothing can still be within it.
Treating the sub-section (2) exclusion as covering any commercial use. It applies only to portions the assessee occupies for his own business or profession the profits of which are chargeable to tax — letting the premises to someone else's business is not occupation by the assessee.
Assuming bare land is covered. The charge is on buildings or lands appurtenant to them, so land not appurtenant to a building is outside this section.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Notification No. 11 — Amendment of the Income-tax Rules under section 22 of the Income-tax Act, 1961 2008-01-18
Notification No. 264 — Amendment of the Income-tax Rules under section 2 of the Income-tax Act, 1961 2007-10-23
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 20. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v Podar Cement (P) LtdSupreme CourtCuts both waystagged s.22 I have paid for the flat and I am in possession, but the conveyance was never registered. Am I the owner for s.22?
Chennai Properties and Investments Ltd v CITSupreme CourtHelps taxpayertagged s.22 My company's whole business is acquiring properties and letting them. Is the rent business income or house property income?
Raj Dadarkar & Associates v ACITSupreme CourtHelps departmenttagged s.22 Our deed says sub-letting is our business. Does that make the licence fees business income?
Sultan Brothers P Ltd v CITSupreme CourtHelps taxpayertagged s.22 I let a building together with its furniture and fittings under one agreement. Is that rent house property income?
Ansal Housing & Construction Ltd v ACITHigh CourtHelps departmenttagged s.22 My unsold flats are stock in trade and were never let. Can the AO still tax notional rent?
CIT v Gundecha BuildersHigh CourtHelps taxpayertagged s.22 I let out the unsold part of my project. Is that rent business income or house property?
CIT v J.K. Investors (Bom.) Ltd.High CourtHelps taxpayertagged s.22 I charge rent under one agreement and service charges for air-conditioning and building facilities under another. Which head do the service charges…
CIT v Sane & Doshi EnterprisesHigh CourtHelps taxpayertagged s.22 The department has taxed the rent from my unsold flats under income from house property. Can I still deduct the interest on the money I borrowed to…
CIT v Shambhu Investment P LtdHigh CourtHelps departmenttagged s.22 I let furnished office space for one inclusive monthly rent and took a large interest-free deposit. Is that income from house property or business…
CIT v Tip Top TypographyHigh CourtHelps taxpayertagged s.22 The Assessing Officer disbelieves the rent I have declared and has fixed a higher annual value from properties he says are comparable. What must he…
Shivani Madan v PCITHigh CourtHelps taxpayertagged s.22 My husband and I are both on the sale deed. Must half the annual value be taxed on me?
Tivoli Investment & Trading Co v ACITHigh CourtHelps departmenttagged s.22 The officer says my declared rent is too low and has fixed a much higher annual value. Is he bound by the municipal rateable value?
Vivek Jain v ACITHigh CourtHelps departmenttagged s.22 My flat was never let during the year. Can I take the annual value as nil under the vacancy clause?
Kavita Marketing (P) Ltd v ITOITATCuts both waystagged s.22 I bill the same tenant rent and separate facility or service charges. Can the Assessing Officer tax the service charges as income from house property?
Osho Developers v ACITITATHelps taxpayertagged s.22 I'm a builder holding unsold flats as stock. Can notional rent be taxed as house property?
Ramesh Dungarshi Shah v DCITITATCuts both waystagged s.22 I'm a builder taxed on notional rent for unsold flats. From which year can that apply?
Sachin R Tendulkar v DCITITATHelps taxpayertagged s.22 My flat stayed vacant although I tried to let it. Can I still claim vacancy allowance?
Saif Ali Khan Pataudi v ACITITATtagged s.22 The flat could not be let at all because it did not match the sanctioned plan and needed alteration. Am I still taxable on a notional annual value?
Sonu Realtors P Ltd v DCITITATHelps taxpayertagged s.22 The flat was let for three years, then lay empty for the whole of this year. Is the annual value nil?
Sunil Ramnarayan Mantri v DCITITATHelps taxpayertagged s.22 My property was let for only a few days in the year and lay vacant for the rest. The officer has taxed the full twelve-month notional value. Can…
Syeda Bibi Sadiqa v DCITITATHelps taxpayertagged s.22 Is there a ceiling on the interest I can deduct on a house that is let out?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.