Tax on Rental Income
Calculate tax on your rental income. Includes 30% standard deduction, municipal taxes, home loan interest deduction and net taxable rent. Compare effective rental yield after tax.
Tax on Rental Income
30% standard deduction + municipal taxes + home loan interest
Property tax paid to municipal corporation (annual)
Interest on loan taken for this rented property (no cap)
TDS on rent: tenant must deduct 10% TDS if monthly rent exceeds Rs 50,000. Applicable under both regimes.
Rental income is taxed after a flat 30% standard deduction (no proof needed) and municipal taxes paid. If you have a home loan on the rented property, 100% of interest is deductible (no Rs 2L cap — unlike self-occupied property). This makes leveraged rental investment significantly more tax-efficient than it appears.
How is Rental Income Taxed in India?
Rental income is taxed under the head "Income from House Property." The taxation process has three steps: first, calculate Net Annual Value (NAV) by subtracting municipal taxes paid from gross annual rent; second, deduct 30% of NAV as a standard deduction under Section 24(a); third, deduct home loan interest paid under Section 24(b). The remaining amount is added to your income and taxed at your slab rate.
The 30% standard deduction explained
Section 24(a) allows a flat 30% deduction on Net Annual Value, regardless of actual maintenance or repair expenses. No bills or proof are required. If your NAV is Rs 3 lakh per year, you automatically get Rs 90,000 as standard deduction — even if you spent nothing on repairs. This makes rental income more tax-efficient than it appears at first glance.
Home loan interest on rented property — no cap
For self-occupied property, home loan interest deduction under Section 24(b) is capped at Rs 2 lakh per year. But for let-out (rented) property, there is no cap — the full interest amount is deductible. This means a highly leveraged rental investment with large interest outgo can significantly reduce or even eliminate the taxable rental income.
TDS on rent — when tenants must deduct
If monthly rent exceeds Rs 50,000, the tenant (individual or HUF) is required to deduct 10% TDS before paying rent and deposit it with the government using Form 26QC. As a landlord receiving rent above this threshold, ensure your tenant is deducting and depositing TDS — you can verify this in your Form 26AS. The TDS credit can be claimed when filing your ITR.