Section 23 → Section 21

Annual value of house property

Section 23 of the old Income-tax Act, 1961 · new section 21 under the Income-tax Act, 2025

New reference Section 21

Income-tax Act, 1961Section 23

Higher of expected rent and actual rent; lower actual rent due to vacancy accepted
Municipal taxes paid deducted
Up to two self-occupied houses: annual value nil
Unsold flats held as stock-in-trade: nil for two years after completion certificate

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 21

Section 21(1), (2): same expected rent / actual rent / vacancy rules
21(3): municipal taxes actually paid deducted
21(5): unsold stock-in-trade — nil up to two years from the end of the year of completion certificate
Self-occupied houses: nil annual value (up to two)

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Renumbered. Finance Act 2026 reworded 21(5) to 'nil up to two years' for unsold inventory.

Practice notes

Deductions from annual value (30% and interest) are in section 22 — see the section 24 page.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What is section 23 (annual value) in the new Income Tax Act?

Section 21 of the Income-tax Act, 2025.

What changed in section 23 under the new Income Tax Act?

Renumbered. Finance Act 2026 reworded 21(5) to 'nil up to two years' for unsold inventory.

Is section 23 still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 23 of the 1961 Act. Section 21 of the 2025 Act applies from tax year 2026-27.

Related sections

24→22Deductions from income from house property: 30% standard deduction and home-loan interest 22–27→20–25Annual value, 30% standard deduction, arrears of rent, co-owners, deemed owner 80EE→130Additional interest deduction on home loan (loans sanctioned in FY 2016-17)