Income from house property: how rent and home loans are taxed
Rent from a house, flat, shop or office you own is taxed under its own head, with its own deductions. The same head also decides how much of your home loan interest you can claim, which is where the old and new regimes differ most.
FilingBase editorial team · Facts checked against official sources on · Published
Quick answer
Rent is taxed after deducting municipal taxes, a flat 30% standard deduction and home loan interest. In the old regime, interest on a self-occupied home is deductible up to ₹2 lakh and house property losses can offset other income up to ₹2 lakh. The new regime allows neither.
- Up to two homes can be self-occupied
- Let-out interest allowed in both regimes
- Losses carried forward 8 years (old regime)
The computation
| Step | Let-out property |
|---|---|
| Gross annual value | Higher of actual rent received or receivable and the expected market rent (subject to rent-control limits); unrealised rent is excluded |
| Less: municipal taxes | Property tax actually paid by the owner in the year |
| = Net annual value | |
| Less: standard deduction | 30% of net annual value, whatever you actually spent on repairs |
| Less: interest on home loan | Full interest for the year on a let-out property |
| = Income from house property | Can be negative (a loss) |
Example. Rent ₹3,00,000, property tax ₹20,000, home loan interest ₹1,50,000. Net annual value ₹2,80,000; less 30% (₹84,000) and interest; income ₹46,000.
Self-occupied homes
- You can treat up to two houses as self-occupied. Their annual value is nil, whether or not you live there for work reasons.
- A third house is treated as deemed let-out, taxed on expected rent even if empty.
- Interest on a self-occupied home: deductible up to ₹2 lakh a year in total, in the old regime only. Not deductible at all in the new regime.
- The ₹2 lakh limit falls to ₹30,000 if the loan was for repairs, or if construction is not completed within five years from the end of the year in which the loan was taken.
Old regime or new regime
| Old regime | New regime | |
|---|---|---|
| Interest on self-occupied home | Up to ₹2 lakh | Not allowed |
| Interest on let-out property | Full interest | Full interest, but only against that property’s rent |
| Loss from house property set off against salary or other income | Up to ₹2 lakh a year | Not allowed |
| Carry forward of unabsorbed loss | 8 years, against house property income | Not allowed for the set-off-denied loss |
| Principal repayment | Within the ₹1.5 lakh Section 80C limit | Not allowed |
People with a large home loan on a self-occupied flat are the main group for whom the old regime still wins. Run the numbers in our regime calculator.
Pre-construction interest and co-owners
- Pre-construction interest: interest paid before the year construction completes is claimed in five equal instalments starting that year, within the same overall limits.
- Co-owners: each co-owner who is also a co-borrower can claim interest up to the limit on their share, so a couple jointly owning and repaying can together claim up to ₹4 lakh on a self-occupied home in the old regime.
- Arrears of rent and unrealised rent recovered later are taxed in the year received, after a 30% deduction.
Related taxes on rent
- TDS: tenants paying above ₹50,000 a month deduct 2% or 10% depending on who they are; see our TDS on rent guide.
- GST: commercial rent above the registration threshold attracts 18% GST; residential rent to a registered business can fall under reverse charge. See our GST on rent guide.
- Selling the property is a capital gains question; see our capital gains calculator.
- ITR form: ITR-1 allows up to two house properties; beyond that, or with losses carried forward, use ITR-2.
Old vs new regime: a worked example
Rahul earns a salary of ₹20 lakh and pays ₹3 lakh of interest on a home loan for the flat he lives in, plus ₹1.5 lakh of principal.
| Old regime | New regime | |
|---|---|---|
| Salary after standard deduction | ₹19,50,000 | ₹19,25,000 |
| Home loan interest (self-occupied) | ₹2,00,000 (capped) | Not allowed |
| Principal under 80C | ₹1,50,000 | Not allowed |
| Taxable income | ₹16,00,000 | ₹19,25,000 |
| Tax before cess | ₹2,92,500 | ₹1,85,000 |
Even with the full home loan benefit, the new regime is cheaper for Rahul by about ₹1.07 lakh. The old regime starts to win only with HRA, larger deductions or a lower slab structure; test yours in the calculator.
Frequently asked questions
How is rental income taxed in India?
Net annual value (rent less municipal tax) is reduced by a flat 30% standard deduction and home loan interest; the balance is taxed at your slab rate.
Can I claim home loan interest in the new tax regime?
Only on a let-out property, against its own rent. Interest on a self-occupied home is not deductible in the new regime.
How many houses can be self-occupied?
Up to two. Their annual value is nil. A third house is treated as let out.
What is the 30% deduction on rental income?
A flat standard deduction of 30% of net annual value for repairs and maintenance, available whatever you actually spend.
Can house property loss be set off against salary?
In the old regime, up to ₹2 lakh a year, with the rest carried forward for 8 years. In the new regime, it cannot be set off against other income.
Rental income or a home loan to claim?
A FilingBase CA compares both regimes on your property numbers and files ITR-1 or ITR-2 from ₹499.
Keep reading.
TDS on Rent in 2026: Section 194-I and 194-IB Limits, Rates, Form 26QC, NRI Landlords and What Tenants Get Wrong
The ₹50,000-a-month threshold, 10% for businesses and 2% for individuals, Form 26QC without a TAN, and the 31.2% rule when the landlord is an NRI.
Read guide→GuideGST on Rent in 2026: Commercial and Residential Property, Forward Charge vs Reverse Charge, and Who Actually Pays
18% on commercial rent, reverse charge when the landlord is unregistered, the residential rule for registered tenants, and whether you get the credit.
Read guide→GuideSection 80C deduction list 2026
Every item that counts toward the ₹1.5 lakh limit, the current small-savings rates, and when claiming 80C still beats the new regime.
Read guide→Official references
The statutory sources behind this page. We keep our guidance aligned to them — verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.