Rental Income Tax in India: A Guide for Landlords
Understand how rent from a house or flat is taxed in India, the 30% standard deduction, municipal tax, home loan interest, TDS on rent and how to report rental income correctly.
If you rent out a flat or a house, the rent is income and is taxable. Many landlords either forget to report it or report it wrongly. The tax law, though, gives you several legitimate deductions, so the taxable amount is usually lower than the rent you receive. This guide explains the basics in plain language.
The Income-tax Act has been rewritten, and the new law is meant to replace the 1961 Act from 1 April 2026. Section numbers have changed, but the main ideas on house property income continue. Confirm current rules before you file.
In short: Rent is taxed under "income from house property". From the rent, you subtract municipal taxes paid, then a standard deduction of 30% of the remainder, then home loan interest. The result is added to your other income and taxed at your slab rate. Report all rent, keep proof and check TDS rules.
The basic calculation
The tax law starts with the annual value of the property, which for a rented house is generally the rent you receive or are entitled to receive in the year (with some adjustments for vacancy and for rent that is unreasonably low). Then:
- Annual value (rent for the year)
- Less: municipal taxes actually paid by you during the year
- = Net annual value
- Less: 30% standard deduction on the net annual value (for repairs and maintenance, whatever you actually spend)
- Less: interest on borrowed capital (home loan interest)
- = Income from house property
News reports of the new Act's revised bill said the 30% deduction is calculated after municipal taxes are subtracted, which matches current practice. Check the final law.
Worked example
A landlord rents a flat at ₹25,000 a month. The municipal tax paid for the year is ₹6,000. The home loan interest for the year is ₹1,50,000. These numbers are illustrations.
| Item | Amount |
|---|---|
| Annual rent (₹25,000 × 12) | ₹3,00,000 |
| Less: municipal tax paid | ₹6,000 |
| Net annual value | ₹2,94,000 |
| Less: 30% standard deduction | ₹88,200 |
| Less: home loan interest | ₹1,50,000 |
| Income from house property | ₹55,800 |
The ₹55,800 is added to the landlord's other income and taxed at the applicable slab rate. In this case the taxable amount is far lower than the rent of ₹3 lakh.
Home loan interest on a rented house
For a let-out property, the interest on the home loan is generally allowed as a deduction without the cap that applies to self-occupied homes. However, when the interest and other deductions are more than the rent, the result is a loss from house property. The loss you can set off against your other income in the same year is limited by the law (it was ₹2 lakh under the 1961 Act), and any excess can be carried forward for several years. The details differ between the old and new tax regimes, and the new Act may affect them, so confirm the position with a tax professional.
Interest paid before the property was completed (pre-construction interest) can usually be claimed in five equal yearly instalments starting from the year of completion. See home loan tax benefits.
Municipal taxes
Only the municipal taxes (property tax) actually paid by the owner during the year are deducted. If the tenant pays them under the agreement, the owner cannot claim them. Keep the receipts.
Vacancy
If the property was vacant for part of the year, the annual value may be adjusted. A property that is vacant for the whole year and not self-occupied can be treated as having a notional value for tax purposes in some cases. Ask your tax professional how it applies to you.
Maintenance charges and repairs
The 30% standard deduction already covers repairs and maintenance, so you cannot claim actual repair costs separately. Society maintenance charges paid by the tenant are not your income. If the landlord receives them as part of rent, treat them as per advice.
TDS on rent: what tenants must do
In many cases, a tenant who pays rent above a threshold in a year must deduct tax at source (TDS) and deposit it. The rules depend on whether the tenant is an individual, a business or a company, and on the amount. The threshold and rates have been revised in recent years, so check the Income Tax Department's website for the present rule. As a landlord:
- Ask your tenant whether TDS applies.
- If it does, you will get a TDS certificate and the tax deducted shows up in your tax records. You can claim credit for it in your return.
- Give your PAN to the tenant. Without it, the TDS rate can be higher.
Advance rent, deposit and arrears
- Security deposit: a refundable deposit is not income when you receive it. If you keep part of it as rent, that part becomes income.
- Advance rent: taxed in the year it relates to, or as per the rules.
- Arrears of rent received later: taxed in the year of receipt, with a deduction as per the rules.
Who is taxed when there is more than one owner
If a rented property is jointly owned, each co-owner's share of income is taxed in their own hands according to their share. Co-owners who are also co-borrowers can each claim their share of interest. See joint home loan and co-ownership guide.
Documents to keep
- A signed rent agreement.
- Proof of rent received, such as bank statements or receipts.
- Municipal tax receipts.
- Home loan interest certificate from the lender.
- TDS certificates, if any.
- Evidence of capital improvements, for future capital gains calculations. See capital gains tax on selling a house.
How to report it in your return
- Add the rent received to the house property section in your income tax return.
- Enter the municipal tax, the 30% deduction and the interest as the form asks.
- Report each property separately if you have more than one.
- Include TDS credits.
- File the return before the due date.
If you earn rent from a house you also use for business, the tax treatment can differ. Ask a professional.
GST on rent
GST on rent depends on whether the property is residential or commercial and on who the tenant is, and the rules have special cases. Residential rent for use as a home generally does not attract GST in the usual case, while commercial rent above the threshold can. The rules change, so confirm on the GST portal or with a professional.
Common mistakes
- Not reporting rent because there is no TDS.
- Claiming repair costs on top of the 30% deduction.
- Claiming municipal tax that the tenant paid.
- Forgetting to claim the home loan interest.
- Not keeping proof of rent received.
- Receiving rent in cash with no record.
- Ignoring TDS notices from tenants.
Frequently asked questions
Do I pay tax if my rent is below the basic exemption limit?
Tax depends on your total income. If your total taxable income is below the exemption limit, you may owe no tax, but you may still need to file a return in some cases.
Is the 30% deduction available under the new tax regime?
The standard deduction on house property income has generally been available in both regimes, but check the current law, as the rules differ for some deductions.
Can I claim a loss if my rent is lower than my loan interest?
Yes, up to the limits for set-off against other income and with carry-forward. The rules differ by regime, so check.
What if my tenant is a company?
The tenant may have to deduct TDS, and other rules may apply. Ask your tenant and a tax professional.
Tax rates, limits and section numbers change. The worked example uses simple illustrative numbers. This guide is general information, not tax advice. Consult a chartered accountant.
