Quick answer: Rental income is taxed under the head Income from House Property. Take the Gross Annual Value (GAV), subtract municipal taxes paid to get the Net Annual Value (NAV), then deduct a flat 30% standard deduction and the interest paid on a housing loan. What is left is added to your total income and taxed at your slab rate.
What counts as house-property income?
- What is a house property? A building, plus the land attached to it. A shop, office, or flat all count. Vacant land on its own does not.
- Who is taxed? Only the owner. If you merely collect rent on someone else’s property, that rent is not house-property income in your hands.
- What is excluded? Property you use for your own business or profession is not taxed under this head.
- Composite rent: If the rent covers the building plus other assets or services (furniture, machinery, services) and the two cannot be separated, the whole rent is taxed as business income or income from other sources. If they can be separated, the building part is taxed as house-property income and the rest under the other head.
- Deemed owner cases: You can be taxed as the owner even without a sale deed in your name — for example, a transfer to your spouse or minor child without adequate consideration, a flat allotted by a co-operative society or company, possession of property under an agreement to sell, or a lease of more than 12 years.
Step-by-step calculation: a worked example
| Description | Amount (₹) |
|---|---|
| Monthly rent received | 30,000 |
| Annual rent (GAV) | 3,60,000 |
| Municipal taxes paid | 12,000 |
| Net Annual Value (NAV) (GAV − municipal tax) | 3,48,000 |
| 30% standard deduction (Section 24, now Section 22) | 1,04,400 |
| Amount after standard deduction | 2,43,600 |
| Interest paid on housing loan | 1,50,000 |
| Taxable income from house property | 93,600 |
How the numbers work:
- Gross Annual Value (GAV): the rent you actually receive, or the rent the property could reasonably fetch — whichever is higher. In this example, ₹30,000 a month is ₹3,60,000 a year.
- Municipal taxes: property tax you actually paid to the local body during the year. Subtract it from GAV to get NAV. Unpaid municipal tax cannot be deducted.
- Standard deduction: a flat 30% of NAV under Section 24 (now Section 22). No bills are needed. The percentage itself is the allowance.
- Home-loan interest: the interest you paid in the year, allowed under the same Section 24 (now Section 22).
- The balance after both deductions is added to your total income and taxed at your slab rate.
Self-occupied property: the house you live in
- Annual value is nil. A house you live in has no taxable rental income, so the 30% deduction does not come into play.
- Two houses allowed. You can treat up to two houses as self-occupied. From the third house onward, the property is treated as deemed let-out (see below).
- Home-loan interest: in the old regime, interest on a loan for a self-occupied house is deductible up to ₹2 lakh a year under Section 24 (now Section 22). In the new regime, there is no deduction for self-occupied house interest.
- ₹30,000 cap: if the loan was taken before 1 April 1999, the interest deduction for a self-occupied house is limited to ₹30,000.
- Pre-construction interest: interest paid before the building is completed cannot be claimed while construction is on. After completion, it is allowed in five equal instalments, one each year. For a self-occupied house, each instalment counts within the ₹2 lakh cap.
Let-out and deemed let-out property
- Let-out property: the house is actually rented out. GAV is the higher of actual rent received and the expected rent (the reasonable rent the property could fetch).
- Deemed let-out property: from the third house onward, the property is treated as let-out even if it is vacant. Expected rent is used as GAV, and tax is charged on it.
- Vacancy: if the property stayed vacant for the whole or part of the year, and the actual rent received is lower than the expected rent only because of that vacancy, GAV is taken as the actual rent received.
- Unrealised rent: rent that fell due but was never received is excluded from GAV if the tenancy was genuine, the defaulting tenant has vacated or you have taken steps to get them to vacate, and the other conditions in the rules are met.
- Arrears of rent: rent arrears received later are taxed in the year you receive them, under Section 25A (now Section 23). The 30% standard deduction is still allowed on the arrears.
Loss from house property: how set-off and carry-forward work
When interest is high, the house-property calculation can turn negative. That loss is useful — but only within limits.
- Set-off this year: a house-property loss can be set off against salary, business income, or other income, up to ₹2 lakh in the same year.
- Carry-forward: any loss left over can be carried forward for 8 years and set off only against income from house property in those years. There is no ₹2 lakh cap on this later set-off — the full carried-forward loss can be used against future house-property income.
Worked loss example (continuing the numbers above): NAV after the 30% deduction is ₹2,43,600. Suppose the home-loan interest is ₹8,00,000 instead of ₹1,50,000.
| Description | Amount (₹) |
|---|---|
| NAV after 30% deduction | 2,43,600 |
| Interest on housing loan | 8,00,000 |
| Loss from house property | −5,56,400 |
| Set off against salary/other income this year (max ₹2 lakh) | −2,00,000 |
| Loss carried forward (8 years, against house-property income only) | −3,56,400 |
Home-loan extras: principal, 80EE and 80EEA
Interest under Section 24 (now Section 22) is only part of the story. Home buyers get more relief — all of it in the old regime only.
| Benefit | Limit | Section | Key conditions |
|---|---|---|---|
| Principal repayment | ₹1.5 lakh | Section 80C (now Section 123) | Old regime only. Shared with PPF, ELSS, EPF and other 80C items. If you sell the house within 5 years of possession, the deduction claimed earlier can be reversed. |
| Extra interest for first-time buyers | ₹50,000 | Section 80EE | Loan sanctioned between 1 Apr 2016 and 31 Mar 2017, loan up to ₹35 lakh, property value up to ₹50 lakh, first-time buyer. Old regime only. |
| Extra interest for affordable housing | ₹1.5 lakh | Section 80EEA | Loan sanctioned between 1 Apr 2019 and 31 Mar 2022, stamp duty value up to ₹45 lakh, first-time buyer. Old regime only. |
| Co-owners / co-borrowers | Each claims their own share | Section 26 (now Section 24) | Interest and principal are split in proportion to each co-owner’s share. Each co-borrower who is also a co-owner can claim separately. |
See our full guide to Section 80C (now Section 123) for how the ₹1.5 lakh limit works across all 80C items.
New vs old regime for property owners
| Feature | Old regime | New regime (Section 202) |
|---|---|---|
| 30% standard deduction on NAV | Allowed | Allowed |
| Municipal taxes deduction | Allowed | Allowed |
| Interest on loan for let-out property | Allowed, full interest | Allowed, full interest (against rental income) |
| Interest on loan for self-occupied property | Allowed up to ₹2 lakh (or ₹30,000 for pre-1999 loans) | Not allowed |
| Principal repayment (80C) | Allowed | Not allowed |
| Section 80EE / 80EEA | Allowed | Not allowed |
| Set-off of house-property loss against other income | Up to ₹2 lakh | Same rule |
| Carry-forward of loss | 8 years, against house-property income only | Same rule |
So a landlord with a let-out property keeps the main deductions in both regimes. A person living in their own house with a home loan usually gains more from the old regime. Run both and pick the lower tax — our new-regime slabs guide and 87A rebate guide show how the new regime’s zero-tax limit up to ₹12 lakh changes the maths.
TDS on rent received (landlord side)
As a landlord, you do not deduct TDS — your tenant does. The TDS is advance tax, not an extra tax. Claim full credit for it in your return.
| Tenant | TDS rate | Provision |
|---|---|---|
| Individual or HUF paying rent above ₹50,000 a month | 2% | Section 194-IB. Tenant deposits it once a year with Form 26QC; you get Form 16C as the certificate. |
| Company, firm, trust or other tenant (building, land, furniture) | 10% | Section 194-I. (Rent for plant, machinery or equipment is 2%.) |
| Tenant paying rent to an NRI landlord | 30% plus surcharge and cess | Section 195. No ₹50,000 threshold — TDS applies on the full rent. |
How to claim the credit: the TDS appears in your Form 26AS and AIS. It is treated as tax already paid. When you file your ITR, the full amount is allowed as a credit against your tax liability. If the TDS is more than your tax, you get a refund.
Form 13: if your total tax liability is low, you can apply to your Assessing Officer in Form 13 for a lower or nil TDS certificate, and give it to your tenant. For the tenant’s side in detail, see our guide to TDS on rent: 194-I vs 194-IB.
GST on rent: a short note
- Renting a residential dwelling for use as a residence is exempt from GST.
- Rent for commercial property (office, shop, godown) may attract GST at 18% if the landlord is GST-registered. The landlord issues a GST invoice and charges GST on the rent.
Which ITR form to use
| Your situation | ITR form |
|---|---|
| Single house property, total income up to ₹50 lakh, no brought-forward or carry-forward loss | ITR-1 (Sahaj) — report the property in Schedule HP |
| More than one house property, or total income above ₹50 lakh, or carry-forward house-property loss | ITR-2 — Schedule HP covers multiple properties |
| Business or professional income as well | ITR-3 or ITR-4, depending on the case |
Always confirm the correct form for the assessment year you are filing. Selling the property is a different head — capital gains — covered in our capital gains tax guide.
What changed with the Income-tax Act, 2025
From tax year 2026-27, the Income-tax Act, 2025 replaces the 1961 Act. For house property, only the section numbers changed — the calculation is the same:
- Charge of tax: Section 22 → Section 20
- Annual value: Section 23 → Section 21
- Deductions (30% + interest): Section 24 → Section 22
- Arrears and unrealised rent: Section 25A → Section 23
- Co-owners: Section 26 → Section 24
Returns for FY 2025-26, filed in 2026, still use the old numbers.
Frequently asked questions
How much rental income is tax-free in India?
There is no separate tax-free limit for rental income. After the municipal-tax deduction, the 30% standard deduction and home-loan interest, the balance is added to your total income and taxed at slab rates. If that total income stays below the basic exemption limit (₹4 lakh in the new regime, ₹2.5 lakh in the old regime for those under 60), or within the rebate limits (₹12 lakh new regime, ₹5 lakh old regime), your tax can still be nil.
How do I show rental income in my ITR?
Enter the details in Schedule HP of your ITR form: the gross rent, municipal taxes paid, the 30% standard deduction, and the interest paid. Keep the rent agreement, municipal tax receipts, and the lender’s interest certificate with you. Match the figures with your AIS, which already shows any TDS your tenant deducted.
Can I claim the 30% standard deduction without bills or proof?
Yes. The 30% deduction is a flat allowance fixed by law. You do not need to produce repair or maintenance bills for it. You should still keep the rent agreement and municipal tax receipts as records.
Do I pay tax on rent if I live in the house myself?
No. A self-occupied house has a nil annual value, so there is no rental income to tax. You can still claim home-loan interest up to ₹2 lakh in the old regime. In the new regime, that interest deduction is not available.
Is TDS deducted from the rent I receive as a landlord?
It depends on your tenant. An individual or HUF tenant deducts 2% under Section 194-IB if the rent is above ₹50,000 a month. Other tenants deduct 10% on building rent under Section 194-I (2% for plant and machinery). A tenant paying rent to an NRI landlord deducts 30% plus surcharge and cess under Section 195. All of it is credited to you as tax already paid.
What if I own two or more houses?
You can treat up to two houses as self-occupied, with nil annual value. From the third house onward, the property is treated as deemed let-out and taxed on its expected rent even if it is vacant. If you have a carry-forward house-property loss, or more than one house property, you will usually need ITR-2 instead of ITR-1.
Official sources
- Income Tax e-Filing Portal — incometax.gov.in
- Central Board of Direct Taxes — incometaxindia.gov.in
- India Code — Income-tax Act, 2025 text — indiacode.nic.in
Related guides
- Capital Gains Tax 2026: LTCG 12.5%, STCG 20% Rates & Section 54 Exemption
- New vs Old Tax Regime 2026: Which Saves You More Tax?
- 87A Rebate (Now Section 156): How to Pay Zero Tax Up to ₹12 Lakh
Reviewed by Asuthod Rathod, CA
Last updated: 16 October 2026
Disclaimer: This article gives general information only. It is not tax advice. Tax law can change, and individual cases differ. Talk to a qualified tax adviser for advice on your own situation.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.
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