Rent from a property you own is taxed under the head "Income from House Property". Start with Gross Annual Value (higher of actual rent or fair rent), subtract municipal taxes you paid to get Net Annual Value (NAV), then take a flat 30% standard deduction u/s 24(a) and the home-loan interest u/s 24(b). The balance is added to your total income and taxed at your slab. Self-occupied interest is capped at Rs 2,00,000; for a let-out property the interest is fully deductible but the resulting house-property loss you can set off against other income is capped at Rs 2 lakh a year.
The 30% standard deduction under Section 24(a) is computed on Net Annual Value, not on actual expenses. You get it whether or not you actually spent on repairs, maintenance or insurance, and you do not need to keep or produce any bills. Only the municipal taxes you actually paid are deducted separately (before the 30%).
How Rental Income Is Calculated
House-property income is built up in a fixed order. The same five steps apply to a residential flat and a commercial shop — the head is the property, not the type of tenant.
Here is the same computation on numbers, for a residential flat let at Rs 30,000/month and a commercial office let at Rs 60,000/month (with home-loan interest of Rs 1.5 lakh and Rs 3 lakh respectively).
Residential flat (annual)
Commercial office (annual)
The taxable house-property income above is then added to your salary, business or other income and taxed at your applicable slab rate. Use our income-tax calculator to see the actual tax at your slab.
Deductions Allowed on House Property
| Deduction | How much | Notes |
|---|---|---|
| Municipal / property taxes | Actual paid | Deducted from GAV to arrive at NAV; only if paid by the owner in the year |
| Standard deduction — Sec 24(a) | 30% of NAV | Flat; covers all repairs, maintenance and insurance — no bills needed |
| Home-loan interest (self-occupied) — Sec 24(b) | Up to Rs 2,00,000 | Old regime only for self-occupied; combined cap for up to 2 self-occupied houses |
| Home-loan interest (let-out) — Sec 24(b) | Full interest | No cap on the interest itself, but the loss it creates is capped (see below) |
| Pre-construction interest | 1/5th per year | Interest before completion is claimed in 5 equal instalments from the year of completion |
Only these two deductions (municipal taxes and Section 24) are allowed under house property — actual repair or society-maintenance bills are NOT separately deductible; the flat 30% covers them.
From FY 2019-20 you may treat any two house properties as self-occupied (Nil Annual Value). Any property beyond that — even if it is lying vacant and earns no rent — is treated as deemed let-out at expected market rent, and that notional rent is taxed under house property.
Own several properties or unsure how to compute deemed rent?
Get ITR Filing Help →Old vs New Regime for Rental Income
The new regime is the default. For rental income the 30% deduction survives in both regimes — the difference is in home-loan interest and, crucially, in what you can do with a house-property loss.
| Benefit | Old regime | New regime |
|---|---|---|
| 30% standard deduction on let-out property | Yes | Yes |
| Interest u/s 24(b) on let-out property | Full | Full |
| Interest u/s 24(b) on self-occupied house | Up to Rs 2L | Not allowed |
| Set-off of house-property loss vs other income | Up to Rs 2L/yr | Not allowed |
| Carry-forward of unabsorbed HP loss | 8 years | Not allowed |
| Home-loan principal u/s 80C | Up to Rs 1.5L | Not allowed |
Under the new regime a let-out property can still be reported, but if interest exceeds rent the resulting loss cannot reduce your salary or business income — nor be carried forward.
If your home-loan interest on a let-out property is larger than the net rent, you make a house-property loss. Only the old regime lets you set that loss (up to Rs 2 lakh a year) against salary or business income and carry the rest forward for 8 years. In the new regime that loss is simply lost — compare both before choosing.
Not sure which regime saves you more on rental income?
Compare regimes →TDS on Rent — Who Deducts and How Much
A tenant may have to deduct TDS before paying rent. Which section applies depends on who the tenant is, not the landlord.
| Section | Who deducts | Threshold | Rate | TAN? |
|---|---|---|---|---|
| 194-IB | Individual / HUF not under tax audit | Rent over Rs 50,000/month | 2% | No · use PAN |
| 194-I | Company, firm, or individual/HUF under tax audit | Rent over Rs 6,00,000/year | 10% | TAN needed |
| 194-I (plant & machinery) | Same as above | Rent over Rs 6,00,000/year | 2% | TAN needed |
194-IB rate is 2% since 1 Oct 2024 (deducted once a year via Form 26QC; 20% if landlord has no PAN). The 194-I annual threshold was raised from Rs 2.4 lakh to Rs 6 lakh w.e.f. 1 April 2025 (Budget 2025).
TDS deducted by the tenant is not an extra tax — the landlord claims it as credit against their own tax liability while filing the ITR, and any excess is refunded.
- Municipal / property-tax receipts for the year
- Rent agreement and rent-received records
- Home-loan interest certificate from the lender
- Form 26QC / TDS credit (Form 26AS / AIS)
- Details of any self-occupied vs let-out choice
- Pre-construction interest schedule, if applicable
- Old vs new regime decision before filing
- ITR-1 (one house) or ITR-2 (multiple / loss)
Want your rental income, deductions and TDS credit filed correctly?
Get ITR Filing Help →Rental Income Tax — Frequently Asked Questions
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