If you own a property in India and rent it out, the rent you receive is not just passive income—it is taxable under the head "Income from House Property." Whether you are a resident landlord or an NRI, understanding how rental income tax works in India is essential for accurate ITR filing and avoiding penalties. This guide breaks down the calculation, deductions, TDS rules, GST implications, and recent ITR changes for AY 2026-27.
Rental income tax in India is governed by Sections 22 to 27 of the Income Tax Act, 1961. Any rent received from a residential or commercial property is chargeable to tax under the head "Income from House Property." This applies whether the property is let out for residential purposes, commercial use, or even as a furnished accommodation. The tax is calculated on the Net Annual Value (NAV) of the property, which is the gross rent minus municipal taxes paid by the owner.
It is important to note that rental income is taxed on a "receivable" basis, not on actual receipt. If rent is due but not yet collected, it is still taxable in the year it became due, unless it qualifies as unrealised rent under specific conditions. This distinction often trips up first-time landlords who assume that unpaid rent is not taxable.
The calculation of taxable rental income follows a structured process. Each step reduces the gross rent to arrive at the income that is actually added to your total taxable income.
The remaining amount is your taxable income from house property, which is then added to your total income and taxed at your applicable slab rate. You can use the Income Tax Calculator India FY 2026-27 to compute your final tax liability under both regimes.
The 30% standard deduction is one of the most straightforward deductions available to landlords. It is calculated on the Net Annual Value, not on the gross rent. This means if your gross rent is ₹6,00,000 and you paid ₹20,000 in municipal taxes, your NAV is ₹5,80,000. The 30% deduction is 30% of ₹5,80,000, which equals ₹1,74,000. Your taxable house property income becomes ₹4,06,000.
This deduction is a significant relief for landlords because it acknowledges that properties require ongoing maintenance and repairs. Even if your actual expenses are lower, you still get the full 30% deduction. Conversely, if your expenses exceed 30%, you cannot claim the excess unless you are in the business of renting properties and your income is taxed as business income.
Tax Deducted at Source (TDS) on rent is a mechanism to ensure that tax is collected at the point of payment. The rules differ based on who is paying the rent and the amount involved.
| Provision | Applicability | Threshold | TDS Rate |
|---|---|---|---|
| Section 194I | All persons other than individuals/HUF not liable to tax audit | ₹50,000 per month | 10% for land/building/furniture; 2% for plant/machinery |
| Section 194-IB | Individuals and HUFs not liable to tax audit | ₹50,000 per month | 5% |
Under Section 194I, if you are a company or a firm paying rent, you must deduct TDS at 10% on rent for land, building, furniture, or fittings, and 2% for plant or machinery. This applies when the annual rent exceeds ₹2.4 lakh (₹50,000 per month). The TDS must be deposited with the government and reported in Form 26Q.
For individual landlords receiving rent from a tenant who is also an individual or HUF not liable to tax audit, Section 194-IB applies. The tenant must deduct TDS at 5% if the monthly rent exceeds ₹50,000. This deduction is made once a year—either at the time of payment for the last month of the financial year or at the end of the tenancy, whichever is earlier. The tenant can use their PAN instead of obtaining a TAN and must file Form 26QC within 30 days.
The Goods and Services Tax (GST) treatment of rental income depends on the type of property and the purpose of renting. The rules are starkly different for residential and commercial properties.
It is crucial to note that GST on rent is not applicable to residential properties rented for personal use, regardless of the rent amount. This exemption does not extend to commercial rentals or residential properties used for business purposes.
Under the old tax regime, landlords can claim a deduction for home loan interest paid on a let-out property under Section 24(b). The maximum deduction is ₹2 lakh per year. This is in addition to the 30% standard deduction. The interest deduction is available on an accrual basis, meaning it is deductible even if you have not actually paid the interest during the year.
Under the new tax regime, however, this deduction is not available for let-out property. The new regime allows only the 30% standard deduction and municipal taxes. This is a significant difference that can influence which regime is more beneficial for you. If you have a large home loan interest component, the old regime may result in lower tax.
For Assessment Year 2026-27 (Financial Year 2025-26), the choice of ITR form depends on your total income and the number of house properties you own.
The due date for filing ITR for AY 2026-27 is July 31, 2026, for non-audit cases. Late filing attracts penalties under Section 234F, which can range from ₹1,000 to ₹5,000 depending on your income level.
The Income Tax Department has updated the ITR-1 utility for AY 2026-27 with several changes that directly affect landlords. These changes require more detailed reporting of rental income.
These changes mean that landlords need to keep better records of their tenants, co-owners, and rent receipts. It is advisable to collect PAN of tenants and maintain a rent ledger throughout the year.
Non-Resident Indians (NRIs) who own property in India and earn rental income are subject to Indian tax laws. The rental income is fully taxable in India, regardless of where the NRI resides. The tax is calculated in the same manner as for residents—gross rent minus municipal taxes, 30% standard deduction, and home loan interest (under old regime).
However, there are additional considerations for NRIs. TDS under Section 194I applies at 30% (plus surcharge and cess) for rent paid to an NRI, without any threshold limit. The NRI can claim a refund if their actual tax liability is lower. NRIs must file ITR-2 or ITR-3 depending on their total income and other sources. They can also claim benefits under Double Taxation Avoidance Agreements (DTAA) if applicable.
The choice between the old and new tax regimes is critical for landlords. The key differences for rental income are summarised below.
| Feature | Old Regime | New Regime |
|---|---|---|
| 30% Standard Deduction | Available | Available |
| Municipal Taxes Deduction | Available | Available |
| Home Loan Interest (Let-Out) | Up to ₹2 lakh | Not available |
| Basic Exemption Limit | ₹2.5 lakh | ₹3 lakh (₹12 lakh with 87A rebate) |
| Tax Slabs | Higher rates | Lower rates |
If you have a significant home loan interest component on your let-out property, the old regime may be more beneficial. If you have few deductions, the new regime's lower slab rates and higher exemption limit may result in lower tax. You should calculate your tax under both regimes using the Income Tax Calculator India before making a choice.
Rental income is taxable under Income from House Property regardless of your total income. However, if your total taxable income after deductions remains below the basic exemption limit (₹3 lakh under new regime, ₹2.5 lakh under old regime for individuals below 60), you are not required to file an ITR unless you meet other specified conditions like high-value transactions.
Yes. The 30% standard deduction on Net Annual Value under Section 24(a) is available under both the old and new tax regimes. Municipal taxes paid are also deductible under both regimes. However, home loan interest deduction under Section 24(b) is not available under the new regime for let-out property.
Under Section 194I, if annual rent exceeds ₹2.4 lakh (₹50,000 per month), TDS is deducted at 10% for land, building, furniture, or fittings, and 2% for plant or machinery. Under Section 194-IB, individuals and HUFs not liable to tax audit deduct TDS at 5% if monthly rent exceeds ₹50,000.
Renting a residential property for personal use is exempt from GST. However, if a residential property is rented to a GST-registered business entity, GST applies at 18% under the reverse charge mechanism. Commercial properties attract 18% GST if the landlord's turnover exceeds the registration threshold of ₹20 lakh.
For AY 2026-27, ITR-1 (Sahaj) allows reporting income from up to two house properties. You must provide details of co-owners, their PAN or Aadhaar, ownership share, and tenant details in specified cases. If your total income exceeds ₹50 lakh or you have other disqualifying factors, you must file ITR-2.
No. Under the new tax regime, home loan interest deduction under Section 24(b) is not available for let-out property. You can only claim the 30% standard deduction and municipal taxes. Under the old regime, interest up to ₹2 lakh is deductible for let-out property.
Understanding rental income tax in India is essential for every landlord. The rules are nuanced, with different treatments for residential and commercial properties, TDS implications, and regime choices. By staying informed and maintaining accurate records, you can ensure compliance and optimise your tax liability. For quick calculations, use the Income Tax Calculator India FY 2026-27 on Calculator200.com to compare your tax under both regimes and make an informed decision.