How to File Rental Income Tax in India (2025)

If you receive rent for a residential flat, commercial shop, or any other property, that income is taxable in India. Many landlords either under-report it or miss deductions they are entitled to — both errors cost money. This guide explains exactly how rental income is taxed, what you can deduct, and how to report it correctly in your ITR.

Which ITR form do you need?

The right form depends on how many properties you own and your total income sources:

• ITR-1 (Sahaj): Salaried individuals with rental income from one house property and total income up to ₹50 lakh.
• ITR-2: If you have income from more than one house property, capital gains, or income above ₹50 lakh.
• ITR-3 or ITR-4: If you run a business or profession in addition to rental income.

Most salaried landlords with a single let-out flat use ITR-1. If you own two or more rented properties, you must use ITR-2 — a CA can confirm which form applies to your situation.

How rental income is taxed: Income from House Property

Rental income is taxed under the head "Income from House Property" in the Income Tax Act. The taxable amount is not your gross rent but your Net Annual Value (NAV) after deductions. The calculation follows a fixed sequence:

1. Gross Annual Value (GAV): The higher of the actual rent received or the Expected Rent (fair market rent for a comparable property). For a self-occupied property, GAV is taken as nil.
2. Less: Municipal taxes paid: Deduct property tax (municipal tax) paid to the local authority during the financial year. Only taxes actually paid in that year are deductible — not taxes due but unpaid.
3. = Net Annual Value (NAV): GAV minus municipal taxes.
4. Less: Standard Deduction (30% of NAV): A flat 30% of NAV is deductible regardless of your actual maintenance, repair, or insurance costs. You cannot claim actual costs in addition to this.
5. Less: Home loan interest (Section 24b): If you took a loan to buy or construct the rented property, interest paid on that loan is fully deductible from NAV. There is no ₹2 lakh cap for let-out properties (the cap applies only to self-occupied houses).
6. = Taxable Income from House Property: This final amount is added to your total income and taxed at your applicable income slab rate.

Old vs new tax regime: what changes for landlords

The tax regime you choose significantly affects how rental income is treated:

• Old regime: You can claim the 30% standard deduction, municipal taxes paid, and home loan interest under Section 24(b). Loss from house property (when interest exceeds NAV) can be set off against salary income up to ₹2 lakh per year.
• New regime (default from FY 2023-24): The 30% standard deduction and municipal tax deduction are still available. However, home loan interest cannot be deducted for let-out properties under the new regime. Additionally, loss from house property cannot be set off against other heads of income.

If your home loan interest on a let-out property is significant, the old regime will almost always save more tax. Run the numbers or ask a CA before choosing.

TDS on rent: what tenants must deduct

TDS obligations apply to tenants in two situations, and as a landlord you need to understand both because they affect your Form 26AS and ITR filing:

• Individual or HUF tenants renting for personal use (Section 194IB): If monthly rent exceeds ₹50,000, the tenant must deduct TDS at 2% once a year (in March or when the tenancy ends). The tenant files Form 26QC and gives you Form 16C as proof.
• Businesses, companies, or firms renting commercial property (Section 194I): TDS applies if total annual rent exceeds ₹2.4 lakh. Rate is 2% for machinery/equipment and 10% for building or furniture. The tenant files Form 26Q quarterly.

As a landlord, check your Form 26AS on the Income Tax portal before filing ITR to verify all TDS deducted by tenants appears correctly. Mismatches are a common cause of tax notices.

Reporting rental income in ITR: step by step

Once you know your taxable income, here is how to report it:

1. Log in to the Income Tax e-filing portal at incometax.gov.in.
2. Navigate to File Income Tax Return and select the correct assessment year.
3. Choose the appropriate ITR form (ITR-1 or ITR-2).
4. In the Income from House Property schedule, enter the property address, PAN of the tenant (if TDS was deducted), gross rent received, municipal taxes paid, and whether the property is let out or deemed let out.
5. The portal auto-calculates the 30% standard deduction and applies it.
6. Enter home loan interest under Section 24(b) if applicable.
7. The final figure flows into your total income and is taxed at your slab rate.
8. Verify pre-filled data against your Form 26AS, AIS (Annual Information Statement), and TIS before submitting.

What if you own more than one property?

India's tax law has a specific rule for multiple properties. You can declare only one property as self-occupied — it has a NAV of nil and no tax on deemed rent. All other properties you own (whether actually rented or left vacant) are treated as deemed let out. The Income Tax Department assumes you are earning the "expected rent" (fair market rent) on those properties even if they are empty, and taxes you accordingly.

Budget 2025 relaxed this slightly: you can now declare two properties as self-occupied (up from one) — but only if you are actually living in both and neither is rented. Three or more properties: the third and beyond are always deemed let out regardless of actual occupation.

Common mistakes landlords make

• Not reporting rent at all. The AIS now captures TDS data from tenants, rent agreements submitted for HRA by the tenant, and bank credits. The IT Department can identify undeclared rental income algorithmically.
• Forgetting the municipal tax deduction. Many landlords claim the 30% standard deduction but forget to also deduct property tax paid — both are allowed and they reduce NAV further.
• Claiming home loan interest incorrectly under the new regime. Switching to the new tax regime without realising that home loan interest on a let-out property cannot be claimed there.
• Missing TDS credit from Form 26AS. If TDS was deducted by your tenant and you do not claim credit, you overpay tax unnecessarily.
• Using ITR-1 when ITR-2 is required. Filing ITR-1 with two rented properties is an invalid return and will be flagged.

When to bring in a CA

A straightforward rental from a single property is manageable for most people once you understand the structure. But the complexity rises fast in these situations:

• You own two or more properties (self-occupied + let out + deemed let out interactions).
• You took a home loan on the rented property and need to choose between old and new regime.
• Your tenant is a company or a foreign entity with specific TDS rules.
• You are an NRI receiving rent in India.
• You received a notice about rental income mismatch from the IT Department.
• You want to claim house property loss against your salary income under the old regime.