Rent from a property you own is taxed under "Income from House Property". You start with the higher of actual or fair rent (Gross Annual Value), subtract municipal taxes paid to get the Net Annual Value (NAV), then take a flat 30% standard deduction u/s 24(a) and deduct home-loan interest u/s 24(b). The balance is added to your total income and taxed at your slab rate. Residential rent is GST-exempt; commercial rent attracts 18% GST above Rs 20 lakh turnover.
How Rental Income Is Computed
The house-property calculation is a fixed five-step formula. Only municipal taxes actually paid by the owner during the year reduce the annual value, and the 30% deduction is a flat allowance — no bills or receipts are needed to claim it.
Let-out flat — worked example
What the 30% covers
A common mistake is applying 30% to the rent received. The deduction is 30% of Net Annual Value — that is gross rent (or fair rent) after deducting municipal/property taxes actually paid by the owner. Interest under Section 24(b) is then deducted separately, over and above the 30%.
Self-Occupied vs Let-Out vs Deemed Let-Out
You may treat up to two houses as self-occupied with a nil annual value. From the third onwards, one is treated as deemed let-out and taxed on notional (fair) rent even if it is empty.
| Property type | Annual value | 30% deduction | Interest cap u/s 24(b) |
|---|---|---|---|
| Self-occupied (up to 2 houses) | Nil | Not applicable | Rs 2,00,000 (old regime) |
| Let-out (rented) | Actual / fair rent | 30% of NAV | Full / uncapped |
| Deemed let-out (3rd+ house) | Notional fair rent | 30% of NAV | Full / uncapped |
Self-occupied interest deduction (Rs 2L) is available only in the OLD regime. NEW regime allows no interest on self-occupied property.
Old vs New Regime on Rental Income
The new regime is the default from FY 2023-24. It changes the house-property maths in two important ways — the self-occupied interest deduction disappears, and a house-property loss can no longer be set off against your salary or other income.
Old regime — full benefits
- 30% standard deduction on NAV
- Self-occupied interest up to Rs 2 lakh u/s 24(b)
- Let-out interest fully deductible
- House-property loss set-off against other heads up to Rs 2 lakh/yr
New regime (default)
- 30% standard deduction on NAV — still allowed
- No interest deduction on self-occupied house
- Let-out interest allowed (up to rental income)
- House-property LOSS cannot be set off against salary / other income
In the OLD regime, a net loss from house property can offset other income only up to Rs 2,00,000 a year; the excess carries forward 8 years against future house-property income. In the NEW regime, a house-property loss cannot be set off against salary or other heads at all — it only carries forward. Weigh this before choosing a regime with a high-interest home loan.
High home-loan interest on a let-out property? Compare regimes before you file.
Compare old vs new →TDS on Rent — Sections 194-I and 194-IB
The tenant, not the landlord, deducts TDS on rent above the thresholds. As a landlord you still declare the full rent and claim the TDS credit from your Form 26AS / AIS.
| Section | Who deducts | Threshold | TDS rate |
|---|---|---|---|
| 194-I | Company / firm / individual-HUF under tax audit | Annual rent > Rs 2,40,000 | 10% (land / building) |
| 194-IB | Individual / HUF tenant not under tax audit | Monthly rent > Rs 50,000 | 2% once a year / at vacating |
Section 194-IB rate was reduced from 5% to 2% w.e.f. 1 October 2024. Verify the current rate for your period at incometax.gov.in.
If the tenant fails to deduct TDS, the liability to deduct rests with the tenant, but you as landlord must still report the full rental income and pay advance/self-assessment tax on it. You simply will not see a TDS credit in your Form 26AS.
GST on Rental Income
GST and income tax are separate. Rental income tax under house property applies to all rent; GST applies only to commercial rent once the landlord crosses the registration threshold.
| Property | GST? | Rate | Threshold |
|---|---|---|---|
| Residential (house / flat) to individual | No | Exempt | — |
| Commercial (office / shop / warehouse) | Yes | 18% | Turnover > Rs 20 lakh |
| Residential let to a GST-registered business | RCM | 18% | Tenant pays under reverse charge |
See the full breakdown, ITC and RCM rules in our GST-on-rent guide.
For the commercial-rent GST rate, the residential-rent RCM trap and Input Tax Credit, read the dedicated GST on rent guide.
Loss from House Property
If the 30% deduction plus interest exceeds the NAV, you have a loss from house property — common on a let-out flat with a large home loan. In the OLD regime this loss offsets other income up to Rs 2 lakh a year, with the balance carried forward for 8 years against future house-property income only. In the NEW regime, no set-off against other heads is allowed — the loss only carries forward.
- Rent agreement & rent receipts
- Municipal / property-tax paid challan
- Home-loan interest certificate from the lender
- Form 26AS / AIS for TDS on rent (194-I / 194-IB)
- Co-ownership share & PAN details
- Old vs new regime chosen before filing
Want us to compute your house-property income and file the return?
Get ITR Filing Help →Tax on Rental Income — Frequently Asked Questions
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Rental Income Filed Right — Every Deduction Claimed
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