Income Tax Act 2023
Section 38 - Allowable Deductions in Computing Rental Income
(as updated till Finance Act 2024)
1[ (1) For computing income from rent of house property owned by a person himself, the following expenses shall be deductible, namely: —
(a) the premium paid for any insurance against the risk of damage or destruction of any house property;
(b) interest or profit paid on any capital loan taken from any bank or finance company for the acquisition, construction, renovation or reconstruction of the house property;
(c) any tax, fee or other annual charge paid on the house property, which is not a capital charge in nature;
(d) if any interest or profit has been paid to any bank or finance company on any capital loan used for acquisition, construction, repair, re-modelling or reconstruction of the house property during the pre-rental period, such interest or profit shall be deductible in equal instalments for a total of 3 (three) consecutive income years starting from the relevant income year in which the property has been rented out first:
Provided that interest or profit or any part thereof, if any, of the pre-rental period shall not be deductible after the said period.
(e) the sums mentioned in the table below for expenditure on collection of rent, water and sewerage, electricity, gas, service charge, repair and maintenance charge and any other basic service, namely:—
Table
| Seril No | Type of property | Deductible expenses (As a percentage of the total rental value) |
| (1) | (2) | (3) |
| 1. | House property used for commercial purpose | 30% (thirty percent) |
| 2. | House property used for non-commercial purpose | 25% (twenty-five percent); |
(f) in case of partial rent of the property, expenses shall be allowable at proportionate rate against the partial rent;
(g) where a property is let out for a part of the income year, the expenditure shall be allowable at the rate proportional to the period for which the property is rented out.
(2) For computing income from rent of a property other than a house property, the expenses shall be deductible subject to the following limits and conditions, namely: —
(a) the deductions allowed under sections 49-55 in computing income from business subject to such limits and conditions;
(b) all deductions other than the allowances under the Third Schedule if made by bank transfer. ]
1 Section 38 was substituted by section 22 of the Finance Act, 2024 (Act No. V of 2024) with effect from 1st July 2024.
Disclaimer: This is the authentic English text of the Income Tax Act 2023, as published under SRO No. 404-Law/2025 dated 08 October 2025. In the event of any inconsistency or conflict between the content on this website and the official Government publications or gazette notifications relating to laws, rules, regulations or SROs, the official Government publications and notifications shall prevail.