Tax on Rental Income in India 2025 — Calculation, Deductions & ITR

Updated: June 2025 | Section 22–24 & 194-IB | AY 2025-26

Quick Answer: Rental income from a house property is taxed under the head "Income from House Property". The computation steps: Gross Annual Value (actual rent or expected rent, whichever is higher) → subtract municipal taxes paid → Net Annual Value (NAV) → subtract 30% of NAV as standard deduction (Section 24a, automatic — no bill needed) → subtract home loan interest (Section 24b — no upper limit for let-out property; set-off against other income capped at ₹2 lakh) = Taxable income from house property. This is then added to your total income and taxed at slab rates. TDS applies if monthly rent exceeds ₹50,000 — tenant deducts 2% TDS under Section 194-IB (since July 2024).

30%

Standard deduction under Section 24(a) — automatically applied on Net Annual Value of let-out property. No bills or receipts needed; covers repairs, maintenance, and all property-related expenses.

Rental Income Tax Calculation — Step by Step

Follow these steps to calculate your taxable income from a rented house property.

Step	Component	Description	Example (₹/year)
1	Gross Annual Value (GAV)	Higher of: actual rent received/receivable OR expected rent (municipal value / fair rent)	₹3,00,000
2	Less: Municipal taxes paid	Property tax paid to local authority during the year (only if actually paid by owner)	− ₹12,000
3	= Net Annual Value (NAV)	GAV minus municipal taxes	₹2,88,000
4	Less: Standard Deduction (Sec 24a)	30% of NAV — mandatory, flat deduction for repairs/maintenance	− ₹86,400
5	Less: Home loan interest (Sec 24b)	Actual interest paid on home loan — no upper limit for let-out property	− ₹1,20,000
6	= Taxable income from house property	This amount is added to total income	₹81,600

Note: If Section 24b interest creates a loss, up to ₹2 lakh can be set off against salary/other income per year; the rest is carried forward for 8 years.

TDS on Rent — Rates, Threshold & Who Deducts

TDS (Tax Deducted at Source) on rent applies in two scenarios depending on the nature of the tenant.

Section	Who Deducts	Applicable When	TDS Rate	Due Date
194-I	Companies, firms, businesses (books of accounts)	Rent > ₹2.40 lakh per year (any property: land, building, plant, machinery)	10% (land/building/furniture); 2% (plant/machinery)	Monthly (7th of next month)
194-IB	Individual / HUF tenants (not under 194-I)	Monthly rent > ₹50,000	2% (reduced from 5% from July 2024)	Last month of FY or when vacating; deposit via Form 26QC

As the landlord, you must check Form 26AS / AIS to ensure TDS deducted by tenant is reflecting. You can claim credit for TDS while filing ITR.

Rental Income — New Tax Regime vs Old Tax Regime

The treatment of rental income differs slightly between the two regimes.

Item	Old Tax Regime	New Tax Regime (115BAC)
Rental income taxable	Yes — at slab rates	Yes — at (lower) slab rates
30% standard deduction (Sec 24a)	Available	Available
Home loan interest — let-out (Sec 24b)	Available (unlimited; ₹2L set-off cap)	Available from FY 2024-25 (Finance Act 2024 restored this for let-out property)
Home loan interest — self-occupied (Sec 24b)	Up to ₹2 lakh deduction	Not available
Principal repayment (Sec 80C)	Up to ₹1.5 lakh deduction	Not available

How to Show Rental Income in ITR

Rental income must be reported under "Income from House Property" in your ITR. The correct form depends on your total income sources:

ITR-1 (Sahaj): For individuals with one house property and income up to ₹50 lakh. Report rental income in Schedule HP.
ITR-2: For individuals with more than one house property, capital gains, or income above ₹50 lakh. Required if you have a loss from house property to carry forward.
Required details: Address of property, co-owner details (if any), tenant PAN (if TDS was deducted), actual rent received, municipal taxes paid, home loan interest (lender's certificate needed).

Frequently Asked Questions

How is rental income taxed in India?

Rental income is taxed under the head "Income from House Property." The Net Annual Value (rent minus municipal taxes) is reduced by a mandatory 30% standard deduction and home loan interest, and the resulting amount is added to your total income and taxed at slab rates. There is no separate flat tax rate — rental income is taxed as ordinary income.

Is rental income added to my salary income for tax calculation?

Yes. Rental income (after allowed deductions) is added to your salary income and all other sources to arrive at total taxable income. It is then taxed at progressive slab rates applicable for that total income. There is no separate tax rate for rental income in India for residents.

What deductions can I claim on rental income?

You can claim: (1) Municipal/property taxes actually paid during the year; (2) 30% flat standard deduction on Net Annual Value under Section 24(a) — no receipts needed; (3) Home loan interest under Section 24(b) — no cap for let-out property. Note: You cannot claim actual repair bills, maintenance expenses, depreciation, or insurance premiums as deductions — these are covered by the 30% standard deduction.

When should TDS be deducted on rent received?

If you are an individual/HUF landlord and your tenant is also an individual/HUF, TDS applies under Section 194-IB only if monthly rent exceeds ₹50,000. The tenant deducts 2% TDS (from July 2024). For corporate tenants, Section 194-I applies at 10% when annual rent exceeds ₹2.40 lakh. As a landlord, you do not deduct TDS yourself — your tenant does and issues Form 16C. You claim TDS credit in your ITR.

Is rental income taxed differently in new vs old tax regime?

Rental income is taxable under both regimes. The key difference: in the old regime, you can claim Section 80C deduction on home loan principal repayment, and home loan interest on self-occupied property is deductible up to ₹2 lakh. In the new regime, Section 80C is unavailable and self-occupied property interest deduction is not allowed. However, for a let-out property, the 30% standard deduction and Section 24(b) interest deduction (without limit) are available in both regimes from FY 2024-25 onwards.

Income Tax On Rental Income Near You

Expert CA/CS assistance for income tax on rental income across India. Click your city for local details.

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