My property was vacant for the whole year. Can the annual value be taken as nil?
It turns on whether there was ever a letting. Section 23(1)(c) reduces the annual value to the rent actually received where the property is let and was vacant during the whole or part of the year. Where the property was let in an earlier year and lay vacant this year, several Tribunal benches allow it. Where it has never been let at all, the Andhra Pradesh High Court in Vivek Jain says the clause has no application.
The clause is short. Section 23(1)(c) applies 'where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable'. So the annual value becomes the actual rent, which where the property was empty throughout is nil.
Everything turns on the three words 'property is let'. Three readings compete, and which one you get depends on your bench.
The strict reading is the Andhra Pradesh High Court's in Vivek Jain v. ACIT (2011) 337 ITR 74. Actual letting is the condition; where the property has not been let out at all during the previous year there is no question of any vacancy allowance under s.23(1)(c), and the annual value goes to clause (a). That Court added a second limit that is easy to miss - the period for which a let-out property may remain vacant cannot exceed the period for which it had been let. The Mumbai Bench in Sharan Hospitality (P) Ltd v. DCIT followed it, holding that 'where the property is let' represents actual letting of a property and cannot be extended to a state of 'intended letting'.
The middle reading, and the useful one, is that a letting in an earlier year is enough. In Sonu Realtors (P) Ltd v. DCIT the Mumbai Bench allowed the clause where the property had been let for thirty-six months, could not be let thereafter and stayed vacant for the whole year, on the condition that the vacancy was not for the owner's own occupation. The textual point is that clause (c) says 'property is let' while other parts of s.23 speak of a house that is actually let, and the difference is deliberate.
The wide reading is that the words describe the character in which the owner holds the property, so genuine documented efforts to let are enough even if there was never a tenant. That is Sachin R. Tendulkar v. DCIT, already in this library, where the Tribunal also held that infallible proof of the attempts to let cannot be demanded. Against it stands the Delhi High Court in Ansal Housing & Construction Ltd v. ACIT, also in this library, which takes a stricter view where the property has never been let in any year.
So, practically: if you have ever let the property, run the case on the earlier letting and you are on solid ground almost anywhere. If you have never let it, you are arguing the wide reading, and in Delhi and in Andhra Pradesh and Telangana that argument is against binding authority.
Two things this clause does not do. It does not help where the property is vacant because the owner keeps it for himself - that is self-occupation under s.23(2), with its own consequences and its own limit of two houses. And it does not govern a developer's unsold flats, which are stock in trade; those are dealt with by s.23(5), which gives a nil annual value for the period up to two years from the end of the financial year in which the certificate of completion of construction is obtained from the competent authority.
Under the Income-tax Act 2025 the annual value provisions are in s.21, and the vacancy position is carried forward - a property vacant during the tax year where the vacancy conditions are satisfied may be assessed on actual rent or at nil.
The officer's default when he sees no rent is to compute under clause (a) at a notional figure, and the assessee's default is to answer that the property was empty - which is not itself an answer. What decides the appeal is a documentary fact that is usually easy to prove or impossible: was this property ever let, and when. Fixing that before the reply is drafted decides which of the three lines you argue and whether the case is worth taking up.
I live in my own house and earn nothing from it. Can Parliament tax me on a notional annual value as income from house property?
My members-only club owns its own club house and uses it for members. Can the Department tax the annual letting value of that building as income from house property?
My company's whole business is acquiring properties and letting them. Is the rent business income or house property income?
My client owns a one-third share in the house he lives in with his brothers. The officer has computed the relief on the whole property and then split the balance three ways. Is that right?
While my plant is still being built I recover rent, hire charges and interest from my own contractors. Is that taxable income before the business starts?
The municipal taxes on my client's let-out property have been levied and are under dispute before the Corporation, and only part has been paid. Can I still deduct the whole amount, relying on Dalhousie Properties?
My client lets specially built units with security, services and staff. The officer says it is still just letting, so it is house property. Is there authority the other way?
I have paid for the flat and I am in possession, but the conveyance was never registered. Am I the owner for s.22?
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