Income from House Property — Rental Income Tax India & Computation Guide (Tax Year 2026-27)

Updated: 3 June 2026 | Income-tax Act, 2025 | Sections 22–27 & Section 24(b)

Rental income from house property is taxable under "Income from House Property." Gross Annual Value (GAV) − municipal taxes = Net Annual Value (NAV). NAV − 30% standard deduction − home loan interest = Net Annual Value taxable. Self-occupied property: NAV deemed zero; home loan interest deductible up to ₹2 lakh under Section 24(b). Rental income above ₹20,000/month triggers TDS obligation for tenants at 2% from FY 2025-26 (Section 194-IB).

30%

Standard deduction allowed on Net Annual Value of let-out property (Section 24a).
Flat deduction regardless of actual repair/maintenance expenses. Not applicable for self-occupied property where NAV = nil.

Self-Occupied vs Let-Out vs Deemed Let-Out Property

Feature	Self-Occupied	Let-Out	Deemed Let-Out
Annual Value (NAV)	₹0 (nil)	GAV − Municipal taxes	Fair market rent − Municipal taxes
30% Standard Deduction	Not applicable (NAV = 0)	30% of NAV — Section 24(a)	30% of NAV — Section 24(a)
Interest Deduction [Sec 24(b)]	Up to ₹2,00,000/year	Actual interest — no limit	Actual interest — no limit
When does it apply?	Owner resides; up to 2 properties can be self-occupied	Property rented out; actual rent received	3rd+ property owned; vacant, not self-occupied
TDS on rent (FY 2025-26)?	N/A	2% if monthly rent > ₹20,000 (Sec 194-IB)	N/A (no actual rent)
Loss possible?	Yes — ₹2L interest deduction creates loss	Yes — if interest > net rental income	Yes — if interest > deemed NAV after deductions

Step-by-Step Tax Computation — Let-Out Property Example

Illustrative computation for a let-out property with annual rent of ₹3,60,000 (₹30,000/month), municipal taxes of ₹24,000, and home loan interest of ₹1,80,000.

Gross Annual Value (GAV)

Higher of actual rent received (₹3,60,000) or annual lettable value

₹3,60,000

Less: Municipal Taxes Paid by Owner

Property tax actually paid during the year (not arrears unless paid this year)

− ₹24,000

Net Annual Value (NAV)

GAV minus municipal taxes — basis for all further deductions

₹3,36,000

Less: Standard Deduction — 30% of NAV [Sec 24(a)]

Flat 30% of ₹3,36,000; covers all property repair/maintenance costs

− ₹1,00,800

Less: Home Loan Interest [Sec 24(b)]

Actual interest paid; no upper limit for let-out property

− ₹1,80,000

Net Taxable Income from House Property

Added to total income; taxed at applicable slab rates

₹55,200

Note: If Step 6 is negative (i.e., interest > net rental income), it is a loss from house property. This loss can be set off against salary or other income up to ₹2,00,000 in the same year. Any excess is carried forward for up to 8 assessment years.

Section 24 Deductions — Complete Rules

Deduction	Section	Self-Occupied Limit	Let-Out / Deemed Let-Out Limit	Key Condition
Standard deduction on NAV	24(a)	Nil (NAV = 0)	30% of NAV	Flat deduction; no expense proof required
Home loan interest — purchase/construction	24(b)	₹2,00,000/year	Actual interest — no limit	Property acquired/constructed within 5 years of loan. Old regime only.
Home loan interest — older/repair loan	24(b)	₹30,000/year	Actual interest — no limit	If property not acquired/constructed within 5 years, or loan for repair/renewal
Pre-construction interest (each instalment)	24(b)	1/5th per year (subject to ₹2L cap)	1/5th per year — no additional cap	Total pre-construction interest divided equally over 5 years from possession year

Loss from House Property — Set-Off & Carry Forward Rules

When deductions under Section 24 exceed the NAV, a loss from house property is created. Applicable rules:

Rule	Detail
Same-year set-off — other heads	Loss from house property can be set off against salary, capital gains, or other income in the same year — but only up to ₹2,00,000 per year.
Carried forward balance	Loss exceeding ₹2L is carried forward. It can only be set off against income from house property in future years — not against salary or any other head.
Carry forward period	8 assessment years immediately following the year in which the loss was incurred.
ITR filing condition	To carry forward a loss, ITR must be filed by the due date (31 July for non-audit cases). Belated return filers cannot carry forward, though same-year set-off up to ₹2L is still allowed.
New tax regime	Under the new regime, set-off of house property loss against other income is not permitted. Section 24(b) interest deduction is also not available under the new regime.

Co-Ownership Rules — Joint Home Loan & Married Couples

When a property is jointly owned, income from house property is taxed in the hands of each co-owner in proportion to their ownership share. Key rules:

Scenario	Tax Treatment
General co-ownership	Each co-owner is taxed on their proportionate share of Net Annual Value (after respective Section 24 deductions). Each files separately in their own ITR.
Married couple — joint home loan (self-occupied)	If both spouses are co-owners and co-borrowers, each can claim up to ₹2,00,000 interest deduction independently — total household deduction up to ₹4,00,000. Each must repay from their own income sources.
Principal repayment (Section 80C)	Each co-borrower can claim principal repayment in their own 80C limit (up to ₹1.5L each), provided they repay from their own funds.
Rental income — co-owned let-out	Rent received is split in ownership ratio. Each co-owner computes their own NAV, claims 30% deduction and interest proportionately, and includes net HP income in their ITR.

TDS on Rent (FY 2025-26 onwards): Tenants paying monthly rent above ₹20,000 must deduct TDS at 2% under Section 194-IB and deposit it with the government. The landlord can claim this as advance tax credit in their ITR. Previously the threshold was ₹50,000/month.

Frequently Asked Questions

How is rental income taxed in India?

Rental income is taxed under the head "Income from House Property." The computation starts with Gross Annual Value (GAV) — the higher of actual rent received or the annual lettable value. Municipal taxes paid by the owner are deducted to arrive at Net Annual Value (NAV). A flat 30% standard deduction on NAV is allowed under Section 24(a), plus actual home loan interest under Section 24(b) (unlimited for let-out; up to ₹2 lakh for self-occupied). The resulting net income is added to your total income and taxed at applicable slab rates. From FY 2025-26, tenants paying monthly rent above ₹20,000 must deduct TDS at 2% under Section 194-IB.

What is the 30% standard deduction on house property?

The 30% standard deduction under Section 24(a) is a flat deduction allowed on the Net Annual Value (NAV) of a let-out or deemed let-out property, irrespective of actual expenses incurred. It is meant to cover repairs, maintenance, insurance, and other property costs. No separate expense — such as painting, plumbing, or furnishing — can be claimed beyond this 30%. The deduction is not available for self-occupied property because NAV is deemed nil for self-occupied properties.

Can I claim home loan interest on let-out property without limit?

Yes. For a let-out or deemed let-out property, the entire amount of home loan interest paid during the year is deductible under Section 24(b) with no upper limit. This is unlike a self-occupied property where the annual cap is ₹2 lakh. However, if the interest exceeds the net rental income and creates a loss, such loss can be set off against other income (salary, etc.) only up to ₹2 lakh in the same year. The remaining unabsorbed loss is carried forward for 8 assessment years. Note: this deduction is available under the old tax regime only.

Is loss from house property allowed to set off against salary?

Yes, but with a cap. Loss from house property — arising when Section 24(b) interest deductions exceed the NAV — can be set off against salary income or other income heads in the same year, subject to a maximum of ₹2,00,000 per year. Any balance loss exceeding ₹2L that cannot be set off in the current year is carried forward for up to 8 assessment years and can only be set off against future income from house property, not against salary or any other income head. Under the new tax regime, this set-off against other heads is not permitted at all.

What is deemed let-out property?

A deemed let-out property is a residential property that is neither self-occupied nor actually rented out. Under the Income-tax Act, a taxpayer can designate up to two self-occupied properties with nil NAV. If a person owns more than two residential properties, the third (and subsequent) property — by the taxpayer's choice — is treated as "deemed to be let out." Its annual value is computed at fair market rent, even if no actual rent is received. Tax is payable on this notional rental income after the 30% standard deduction and any home loan interest deduction. This rule prevents tax avoidance through holding multiple vacant properties.

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