Quick Answer: Rental income from property is taxed under "Income from House Property." Net Annual Value (NAV) = Gross Rent – Municipal Taxes. Standard deduction of 30% of NAV is allowed on NAV (not gross rent). If you have a home loan on the rented property, full interest is deductible (no ₹2L cap for let-out property — available under Old Regime). Loss from house property is limited to ₹2L set-off against other income.
House Property Income — How It's Taxed
Rental income from property is taxed under the head "Income from House Property." India's tax system doesn't just tax actual rent — it can also tax notional (deemed) rent for a vacant property. The computation follows a specific formula.
Tax Calculation Formula
| Step | Let-Out Property | Self-Occupied |
|---|---|---|
| 1. Gross Annual Value (GAV) | Higher of actual rent or Fair Rental Value | ₹0 (deemed nil) |
| 2. Less: Municipal Tax | Actual paid in year | Not applicable |
| 3. Net Annual Value (NAV) | GAV – Municipal Tax | ₹0 |
| 4. Standard Deduction (Sec 30) | 30% of NAV | NIL |
| 5. Interest (Sec 24(b)) | Actual interest — no cap | Max ₹2 Lakh |
| 6. Taxable HP Income | NAV – 30% – Interest | 0 – Interest (max -₹2L) |
Frequently Asked Questions
From FY 2017-18, the maximum house property loss that can be set off against salary or other income is ₹2 lakh per year. Remaining loss can be carried forward for 8 years but can only be set off against house property income in future years.
Yes. If monthly rent exceeds ₹50,000 (₹6L annual) and the tenant is an individual/HUF not in business, Section 194IB requires TDS at 5% (once a year or on the last month). If the rent payer is a business, Section 194I requires TDS at 10% if annual rent exceeds ₹2.4L.