Rental income from a property you own is taxable as 'Income from House Property' under Section 22 of the Income Tax Act. After 30% standard deduction and any home loan interest paid, the remainder is added to your total income and taxed at slab. This calculator shows the exact taxable rental income and tax payable.
What is Rental Tax?
If you own a property and rent it out — residential, commercial, or even a vacant property treated as deemed-let-out — the rent received is taxable. The Income Tax Act treats this as 'Income from House Property', a separate head from salary or business income, with its own rules and deductions.
Three things make this calculation distinct: a flat 30% standard deduction (no proof needed), unlimited deduction of home loan interest paid on the let-out property, and the option to claim Section 24(b) deduction even on losses (carry-forward up to 8 years). Done right, rental property tax can be much less than slab × rent suggests.
How rental income tax is calculated
Step 1 — Gross Annual Value (GAV) is the higher of actual rent received or the municipal/standard rent for similar properties.
Step 2 — Net Annual Value (NAV) = GAV − municipal taxes paid by owner.
Step 3 — Standard Deduction under Section 24(a) is a flat 30% of NAV (covers maintenance, repairs, depreciation — no actual proof needed).
Step 4 — Section 24(b) deduction is the actual home loan interest paid on the let-out property. Unlike self-occupied (₹2 lakh cap), let-out property has no cap — full interest is deductible.
Step 5 — Taxable Income from House Property = NAV − 30% standard − Interest paid. This figure (which can be negative — a loss) is added to or set off against other income heads.
- Muni Tax
- Municipal tax—actually paid by owner during the year
- 0.7
- 30% std deduction—flat allowance for upkeep — no proof needed
How to use this calculator
Enter the actual annual rent received
Total rent for the financial year. If property was let-out only part of the year, enter the months × monthly rent. Vacancy reduces the actual rent received but does not change the calculation method.
Enter municipal tax paid
Property tax paid to the municipal corporation during the year. Only the amount actually paid (not accrued) is deductible. Get receipts for verification.
Enter home loan interest paid
Annual interest on the home loan for this specific property. Available from your bank's annual statement (sometimes called Provisional Interest Certificate). For let-out properties, full interest is deductible — no ₹2 lakh cap.
Pick your tax slab
Final taxable rental income is added to your other income and taxed at slab. The calculator multiplies the taxable HP income by your marginal rate plus 4% cess.
Read taxable HP income and tax payable
Calculator shows the rental income after all deductions, plus the actual rupee tax. If the result is negative (interest exceeds rent net of deductions), it's a 'loss from house property' that can offset other income up to ₹2 lakh per year.
When to use it
Single rental property, no home loan
Annual rent ₹4 lakh, no loan. Taxable HP = (4L − muni) × 0.7. At 30% slab, you pay ~₹84,000 tax on ₹4 lakh rent. The 30% std deduction makes effective rate ~21% even before any other planning.
Rental property with active home loan
Many landlords have ongoing loans on the rental property. Full interest is deductible against rental income, often making the property tax-neutral or even loss-making (helpful for offsetting other income).
Loss from rental property (high-leverage)
Loan interest > rental income net of std deduction creates a tax loss. Up to ₹2 lakh of this loss can offset salary or business income annually; remainder carries forward 8 years to offset future rental income.
Common mistakes to avoid
Forgetting to claim home loan interest on let-out property
Unlike self-occupied (₹2L cap), let-out has unlimited interest deduction. Many landlords with rental income forget to claim full interest, paying tax on income that should be a loss.
Including security deposit in rent
Refundable security deposit is not income — don't include it. Only actual rent received (and any non-refundable advance rent or premium for unfurnished/furnished facility) counts.
Missing TDS by tenant under Section 194IB
Tenants paying over ₹50,000/month rent must deduct 5% TDS once a year on the total annual rent. Cross-check Form 26AS to ensure the deducted amount is credited to your PAN.
Frequently asked questions
Is rental income taxable in India?
How is the 30% standard deduction calculated?
Is home loan interest fully deductible on let-out property?
What if my home loan interest exceeds rental income?
Are security deposits taxable?
What about deemed-let-out properties?
References
- Income Tax Act sections 22-27 — Income from house property— Income Tax Department