Income from House Property: Section 22 of Income Tax Act, 1961 Versus Clause 20 of Income Tax Bill, 2025

Clause 20 Income from house property

Income Tax Bill, 2025

1. Introduction

The taxation of income from house property has been a significant component of India's direct tax framework. This analysis examines the proposed changes in Clause 20 of the Income Tax Bill, 2025, comparing it with the existing Section 22 of the Income Tax Act, 1961, to understand the evolution and implications of this important provision.

2. Legislative Background and Context

Section 22 of the Income Tax Act, 1961, established the framework for taxing income derived from house property. The proposed Clause 20 in the Income Tax Bill, 2025, aims to streamline and modernize these provisions while maintaining the core principles of property income taxation.

3. Detailed Comparative Analysis

3.1 Charging Provision Structure

Existing Provision (Section 22):

The current provision states: "The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner..."

Proposed Provision (Clause 20):

The new clause states: "The annual value of property consisting of any buildings or lands appurtenant thereto, owned by the assessee..."

3.2 Key Changes in Language and Structure

Ownership Expression: 

• Current: "of which the assessee is the owner" 
• Proposed: "owned by the assessee"

This represents a simplification in language while maintaining the same legal effect.

3.3 Business/Professional Use Exception

Current Provision:

The exception is embedded within the main charging section, reading "other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax" Proposed Provision:

The exception is now presented as a separate sub-section (2), stating "The provisions of sub-section (1) shall not apply to such portions of the property, as occupied by the assessee for his business or profession, the profits of which are chargeable to income-tax."

4. Structural Improvements

4.1 Better Organization

The proposed clause demonstrates improved legislative drafting by:

• Separating the charging provision from the exception
• Creating distinct sub-sections for better clarity
• Simplifying language while maintaining legal precision

4.2 Enhanced Clarity

The new structure provides:

• Clearer delineation of scope
• Better readability
• More logical flow of provisions

5. Practical Implications

5.1 Assessment Impact

• Simplified interpretation for tax officers
• Clearer guidance for taxpayers
• Reduced scope for litigation due to improved clarity

5.2 Compliance Considerations

• More straightforward application of provisions
• Better understanding of exceptions
• Clearer segregation of business and residential property portions

6. Conclusion

The proposed Clause 20 represents a structural improvement over the existing Section 22, while maintaining the fundamental principles of house property taxation. The changes focus on clarity and organization rather than substantial modifications to the tax treatment of house property income.

 

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Full Text:

Clause 20 Income from house property

 

Dated: 28-2-2025