Rent from a house or flat is taxed under "Income from House Property". You take the annual rent, subtract municipal taxes paid to get Net Annual Value (NAV), then subtract a flat 30% standard deduction (Section 24a, no bills needed) and your home-loan interest (Section 24b). The balance is added to your total income and taxed at your slab rate — there is no separate flat rate on rent.
How Rental Income Is Taxed
Rent you receive is not taxed rupee-for-rupee. The law gives every let-out property a generous flat deduction and lets you deduct home-loan interest, so only a fraction of the rent is actually taxable.
- Gross Annual Value (GAV) — the higher of actual rent received/receivable or the expected (fair/municipal) rent.
- Less municipal taxes actually paid by the owner during the year → gives you Net Annual Value (NAV).
- Less 30% of NAV as a flat standard deduction under Section 24(a) — automatic, no receipts, covers all repairs and upkeep.
- Less home-loan interest under Section 24(b) — no upper limit for a let-out property.
- The result is income from house property, added to salary and other income and taxed at slab rates.
Because of the flat 30% standard deduction on NAV, at most 70% of your net rent is taxable — and home-loan interest reduces it further. You cannot separately claim actual repairs, maintenance, depreciation or insurance: the 30% deduction replaces all of them.
Rental Income — Step-by-Step Calculation
A let-out flat earning ₹3,00,000 a year in rent, with ₹12,000 municipal tax and ₹1,20,000 home-loan interest:
| Step | Component | Amount (₹/year) |
|---|---|---|
| 1 | Gross Annual Value (actual/expected rent) | ₹3,00,000 |
| 2 | Less: Municipal taxes paid | − ₹12,000 |
| 3 | Net Annual Value (NAV) | ₹2,88,000 |
| 4 | Less: Standard deduction @ 30% of NAV (Sec 24a) | − ₹86,400 |
| 5 | Less: Home-loan interest (Sec 24b) | − ₹1,20,000 |
| 6 | Taxable income from house property | ₹81,600 |
Only ₹81,600 of ₹3,00,000 rent is added to total income and taxed at your slab rate. Confirm figures on incometax.gov.in.
Rent received
What you can & cannot deduct
If Section 24(b) interest turns the property into a loss, in the old regime up to ₹2,00,000 can be set off against salary/other income each year, with the rest carried forward for 8 years. In the new regime a house-property loss cannot be set off against salary at all — only against other house-property income.
Want the numbers done for your actual rent and loan?
Use the Income Tax Calculator →TDS on Rent — Who Deducts and How Much
TDS on rent is deducted by the tenant, not the landlord. Which section applies depends on who the tenant is. As a landlord you claim credit for this TDS in your income tax return after checking Form 26AS / AIS.
| Section | Who Deducts | Applies When | Rate | Deposit |
|---|---|---|---|---|
| 194-I | Companies, firms, businesses (audited) | Annual rent to one landlord > ₹6,00,000 (raised from ₹2.4L on 1 Apr 2025) | 10% land/building | Monthly, by 7th of next month |
| 194-IB | Individuals / HUF tenants (not under 194-I) | Monthly rent > ₹50,000 | 2% | Form 26QC, once a year / on vacating |
Section 194-IB rate was cut to 2% (from 5%) with effect from October 2024. Plant & machinery rent under 194-I is 2%.
- A landlord never deducts their own TDS — the tenant does and issues Form 16C (194-IB) or Form 16A (194-I).
- TDS is only an advance collection: you adjust it against your final tax and can claim a refund if excess.
- If your tenant is an individual paying ≤ ₹50,000/month, no TDS applies at all.
TDS deducted on your rent? Get it matched and refunded in your ITR.
File My Rental ITR →Rental Income — New Regime vs Old Regime
The new regime is the default for FY 2025-26 (AY 2026-27). Rental income is taxable under both, but the deductions that surround it differ.
New regime (default)
- 30% standard deduction on NAV — available
- Home-loan interest on let-out property — fully deductible
- Self-occupied home-loan interest — not allowed
- 80C principal repayment — not allowed
- House-property loss — no set-off against salary
Old regime (optional)
- 30% standard deduction on NAV — available
- Home-loan interest on let-out property — fully deductible
- Self-occupied interest — up to ₹2 lakh
- 80C principal repayment — up to ₹1.5 lakh
- Loss set-off up to ₹2 lakh vs other income
Old regime may win if
- You have a self-occupied home with a big loan (₹2L interest)
- You use 80C, 80D and other deductions heavily
- A large house-property loss to set off against salary
New regime usually wins if
- Your only property is let out (both regimes allow its interest)
- You claim few deductions overall
- You want the higher ₹12L rebate and ₹75,000 standard deduction on salary
Not sure which regime saves more on your rent + salary?
Compare Old vs New →How to Show Rental Income in Your ITR
Report rent under Schedule HP (Income from House Property). The correct form depends on your total income and number of properties.
| ITR Form | Use It When | Notes |
|---|---|---|
| ITR-1 (Sahaj) | One house property, total income ≤ ₹50 lakh | Simplest — rent goes in the house-property field |
| ITR-2 | More than one property, income > ₹50L, or capital gains | Required to carry forward a house-property loss |
Keep the tenant's PAN (if TDS deducted), municipal-tax receipts and the lender's interest certificate ready.
- Actual rent received / receivable
- Municipal (property) taxes paid
- Home-loan interest certificate
- Tenant PAN & TDS (Form 16C / 26AS)
- Co-owner details & share
- Correct ITR form (ITR-1 or ITR-2)
A let-out property is one of the few cases where the new regime rarely costs you — both regimes allow the 30% deduction and full interest on let-out property. Run both regimes before you file; the answer often flips once salary, 80C and a self-occupied loan enter the picture.
Rental Income Tax — FAQs
Related TaxClue services
Rental Income? File It Right and Pay Less
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