Taxes on Rental Income

Rent from property is taxed under income from house property.

How it’s calculated

1. Start with the annual rent received (or reasonably expected).
2. Subtract municipal taxes paid.
3. Subtract a standard deduction of 30 percent of the remaining amount, for repairs and maintenance, whether or not you spend it.
4. Subtract interest on a home loan for the property.

The result is taxable at your slab rate.

Home loan interest

• For a let-out property, interest is deductible, but losses from house property that can be set off against other income are limited to 2 lakh rupees a year, with the rest carried forward.
• For a self-occupied home, interest up to 2 lakh rupees is deductible under the old regime only.

Two self-occupied homes

You can treat up to two homes as self-occupied, with no rental income assumed.

TDS on rent

Tenants paying high rent, above set monthly thresholds, must deduct TDS. This makes rental income visible to tax authorities.

Common mistakes

• Not declaring rent, assuming the tax department won’t know. Rent agreements, TDS and property records increasingly reveal it.
• Forgetting municipal taxes and the 30 percent deduction.

Commercial vs residential

The same rules largely apply, though GST may apply to commercial rents above thresholds.