Rental income tax India — how much do you pay
Rental income in India is taxed as per your income slab after a standard 30% deduction on net annual value. Learn exactly how much you owe and what to dedu
If you’ve rented out a flat or inherited a property that someone else is living in, congratulations — you have rental income. Now the slightly less fun part: you owe tax on it, and the rules are specific enough that a lot of people either overpay or underpay without realising it.
Here’s what actually matters and what you actually owe.
Rental Income Is Taxed as “Income from House Property”
This is the category the Income Tax Act puts your rental earnings into. It doesn’t matter if the property is in your name, jointly owned, or inherited — if you’re receiving rent, it goes here.
The tax isn’t calculated on the raw rent you receive. It’s calculated on something called the Net Annual Value (NAV) — which is essentially your annual rent minus the money you’re allowed to deduct first. That distinction saves you real money, and most people don’t use it fully.
Say you own a 2BHK in Pune and you’re renting it out for ₹22,000 per month. Your gross annual rent is ₹2,64,000. That’s not what gets taxed. Keep reading.
The 30% Standard Deduction — Don’t Skip This
The government lets you deduct 30% of your Net Annual Value as a flat standard deduction to cover maintenance, repairs, wear and tear — no receipts needed, no questions asked. You get this automatically.
So back to that Pune flat. Your gross annual rent is ₹2,64,000. First, subtract municipal taxes paid (say ₹6,000 for the year). That leaves your NAV at ₹2,58,000. Now take the 30% standard deduction: ₹77,400. Your taxable rental income is now ₹1,80,600.
That ₹77,400 deduction costs you nothing extra to claim. It’s sitting there — use it.
How Your Slab Rate Determines the Final Tax
There’s no separate flat rate for rental income. It gets added to your total income and taxed at your income tax slab rate — the same rates that apply to your salary.
This is where it matters whether you’re on the old or new tax regime. The new regime (default from FY 2023-24 onwards) has lower rates but removes most deductions. The old regime lets you claim more deductions, including the home loan interest deduction under Section 24(b) — which can be significant if you’re still paying off a mortgage on the rented property.
Here’s a comparison for someone earning ₹12,00,000 salary with ₹1,80,600 taxable rental income (after deductions), under both regimes:
| Scenario | Old Regime | New Regime |
|---|---|---|
| Total taxable income | ₹13,80,600 | ₹13,80,600 |
| Home loan interest deduction (Section 24b) | Up to ₹2,00,000 | Not available |
| Approx. tax payable | ₹1,62,000 | ₹1,31,000 |
The new regime wins here because the marginal gain from Section 24(b) doesn’t offset the higher slab rates in the old system at this income level. If your home loan interest is large — say ₹1,80,000+ per year — run both calculations before filing. Use our tax calculator to check your exact numbers.
The Home Loan Angle Most People Miss
If you took a loan to buy the property you’re now renting out, the interest you’re paying on that loan is deductible from your rental income under Section 24(b). And for a let-out property (as opposed to a self-occupied one), there’s no ceiling on this deduction under the old regime.
Say you bought a flat in Hyderabad for ₹60,00,000 with a home loan at 8.5%, and you’re paying roughly ₹4,20,000 in interest annually. Under the old regime, you can deduct the full ₹4,20,000 from your rental income. If your gross taxable rental income was ₹3,00,000, you’d actually show a loss of ₹1,20,000 under house property — which can be set off against your salary income, reducing your overall tax bill.
This is one of the few remaining ways to genuinely reduce your salary tax, not just defer it.
Frequently Asked Questions
Is rental income below ₹2.5 lakh tax-free?
Not exactly. Rental income itself doesn’t have a separate exemption threshold. It gets added to your total income — salary, freelance work, everything. If your combined income stays below ₹2,50,000 (old regime basic exemption), then no tax is due. But if you’re a salaried person, you’re almost certainly above that threshold already.
Do I need to declare rental income if the tenant doesn’t deduct TDS?
Yes. TDS (Tax Deducted at Source — where someone deducts tax before paying you) is only mandatory for tenants paying over ₹50,000 per month. If your tenant pays less than that, no TDS is deducted, but you still need to declare the income in your ITR. Skipping it isn’t a grey area.
Can I deduct society maintenance, brokerage, or painting costs from rental income?
No. The 30% standard deduction is meant to cover all of that — it’s a flat allowance in exchange for not needing to document individual expenses. You can’t claim both.
What if the property is jointly owned with my spouse?
Rental income is split based on ownership percentage and each person declares their share separately. If the flat is 50-50, each person reports 50% of the rental income in their own ITR and pays tax at their own slab rate.
When should I choose the old tax regime for rental income?
If you’re claiming a large home loan interest deduction (above ₹1,50,000 annually) and also have other deductions like 80C investments, HRA, and NPS, the old regime often wins. Below that, the new regime’s simpler, lower slabs tend to come out ahead.