Having a property and earning rent from it is a great source of secondary income. However, as per the Indian Income Tax Act, rental income is also taxable, just like you have to pay tax on your salary, business revenue, and earnings from other sources of income. Read the blog further to know about all the taxation rules applicable for the financial year 2024-25 (assessment year 2025-26). Learn about all the applicable deductions and exemptions and how to calculate taxable rental income from house property.
Table of Contents
Before we delve into the computation of income from house property, let us first understand the fundamentals of house property tax:
A self-occupied property is one where the owner resides and doesn’t rent it out. The Gross Annual Value (GAV) of such a property is assumed to be zero, and there is no taxable income from it. However, the owner is eligible for a deduction of up to ₹ 2,00,000 for interest on a home loan under Section 24(b).
A let-out property is one that the owner has rented out to tenants. The income from house property is taxable, and the tax is calculated as per the Gross Annual Value (GAV) of the property.
Notably, a house property, in addition to 2 self-occupied properties, is deemed as a rent-out property—regardless of whether it’s rented out. Therefore, the owner has to pay tax on it.
In simple words, if you own more than two house properties, only two properties can be self-occupied, and the third or more properties are treated as a ‘deemed let-out’ property for tax purposes.
Similarly, inherited property (one that is bequeathed from parents or anyone from the family) can be self-occupied and let out as discussed above. Accordingly, a tax on rental income will be levied.
The Gross Annual Value (GAV) of the property is required for the computation of income from house property. The GAV of the property is the highest of the following:
To compute taxable income from house property, the GAV of the property is required. Certain deductions and exemptions are allowed on the rental income from house property by the government, after which the final taxable income is calculated. The following are the steps to calculate the income from house property for income tax purposes:
As discussed above, the GAV of a house property is the higher of the following:
The GAV of the self-occupied property is taken as zero.
The municipal taxes paid to the local authority during the year are deducted from the GAV of the property to arrive at the Net Annual Value (NAV).
As per the Indian Income Tax Act, a standard deduction of 30% and interest on home loans are allowed on the income from house property.
After subtracting the deductions and exemptions discussed above, the remaining amount is deemed to be the net income from the house property, which is subject to the applicable income tax slab rates.
Please note that all the deductions discussed above can only be claimed under the old tax regime only. Also, that the property owners can only get deductions of up to ₹200,000 on home loan interest for self-occupied properties. However, there is no limit on the deduction for let-out properties.
| Old Tax Regime | ||
| Income Tax Slab | Income Tax Rate | Surcharge |
| Up to ₹ 2,50,000 | Nil | Nil |
| ₹ 2,50,001 – ₹ 5,00,000** | 5% above ₹ 2,50,000 | Nil |
| ₹ 5,00,001 – ₹ 10,00,000 | ₹ 12,500 + 20% above ₹ 5,00,000 | Nil |
| ₹ 10,00,001- ₹ 50,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | Nil |
| ₹ 50,00,001- ₹ 100,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 10% |
| ₹ 100,00,001- ₹ 200,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 15% |
| ₹ 200,00,001- ₹ 500,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 25% |
| Above ₹ 500,00,000 | ₹ 1,12,500 + 30% above ₹ 10,00,000 | 37% |
| New Tax Regime | ||
| Income Tax Slab | Income Tax Rate | Surcharge |
| Up to ₹ 3,00,000 | Nil | Nil |
| ₹ 3,00,001 – ₹ 7,00,000** | 5% above ₹ 3,00,000 | Nil |
| ₹ 7,00,001 – ₹ 10,00,000 | ₹ 20,000 + 10% above ₹ 7,00,000 | Nil |
| ₹ 10,00,001 – ₹ 12,00,000 | ₹ 50,000 + 15% above ₹ 10,00,000 | Nil |
| ₹ 12,00,001 – ₹ 15,00,000 | ₹ 80,000 + 20% above ₹ 12,00,000 | Nil |
| ₹ 15,00,001- ₹ 50,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | Nil |
| ₹ 50,00,001- ₹ 100,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 10% |
| ₹ 100,00,001- ₹ 200,00,000 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 15% |
| Above ₹ ₹ 200,00,001 | ₹ 1,40,000 + 30% above ₹ 15,00,000 | 25% |
**Taxpayers are eligible for a rebate of up to 100% of income tax, subject to a maximum limit depending on tax regimes.
Please note: The above-mentioned tax slabs are only applicable for individuals less than 60 years of age.
Tax Deduction on Principal Repayment
Under Section 80C, a house owner can claim up to ₹1,50,000 for the principal repayment of home loans. However, this deduction is only applicable under the old tax regime.
Under Section 80EE, a homeowner can claim:
Under Section 80EEA, a homeowner can claim:
If the homeowner lives in a rented house but owns another property, he can claim both:
However, the taxpayer must be living in rented accommodation in the city where he works. And he must have availed a loan for a property in a different city where his family resides.
If the home loan is availed jointly, the owners can claim the following deductions:
Please note that this effectively doubles the tax benefits if both co-owners have taxable income.
The following are the conditions to claim home loan deductions on house property:
The following are certain exclusions that can’t be claimed as a deduction under house property income tax:
Understanding how income from house property is taxed in 2024–25 is crucial for homeowners, landlords, and real estate investors. By leveraging available deductions under Section 24, 80EEA, and tax planning strategies, you can optimize your tax liability and maximize returns from your property investments.
A homeowner can claim deductions under Section 24(a), which allows a standard deduction of 30% on Net Annual Value (NAV). The municipal taxes paid can also be deducted. Please note that there is no taxable income for self-occupied properties since the Gross Annual Value (GAV) is considered zero.
If your total annual income is below ₹2,50,000 (including rent and other sources of income), then no tax will be payable under the old tax regime. As per the new tax regime, the same limit is ₹3,00,000.
As per Section 194-I, if the annual rent paid exceeds ₹ 2,40,000, the tenant must deduct TDS at 10% for residential properties.
Under Section 194-IB, for individuals or HUFs (not liable to tax audit), TDS is deducted at 5% if the monthly rent exceeds ₹50,000.
You can legally reduce tax liability on rental income using these methods:
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