How Your Rental Income Is Taxed Under the Income-tax Act, 2025: A Landlord's Guide
Annual value, municipal taxes, the 30% deduction, home loan interest, vacancy and co-owners: how rent from your Mumbai flat is taxed from tax year 2026-27.
From 1 April 2026, rental income is taxed under the Income-tax Act, 2025. The structure is familiar from the 1961 Act, with new section numbers. Commentary maps the house property chapter to sections 20 to 24.
Step by step
| Step | Rule |
|---|---|
| 1. Annual value | Higher of reasonable expected rent and actual rent received or receivable. If vacancy reduces actual rent below expected rent, actual rent is used. |
| 2. Less municipal taxes | Property tax actually paid by you during the year |
| 3. Less 30% standard deduction | 30% of the annual value after municipal taxes, regardless of actual repair costs |
| 4. Less home loan interest | For a let-out flat, interest on a loan to buy, build or repair it, with no upper limit; pre-construction interest in five equal instalments |
Example
Illustrative only. Rent Rs 50,000 a month = Rs 6 lakh a year. Property tax paid Rs 30,000. Net annual value Rs 5.7 lakh. 30% deduction Rs 1.71 lakh. Income before interest Rs 3.99 lakh. With Rs 2.5 lakh of home loan interest, taxable rental income is Rs 1.49 lakh.
The 30% deduction is automatic. You don't need repair bills to claim it, and you can't claim actual repairs on top of it.
Things landlords often get wrong
- Claiming maintenance or repairs separately. The 30% deduction is meant to cover these. Society maintenance isn't deductible on top.
- Deducting property tax paid by the tenant. Only taxes you bear and pay count.
- Forgetting unrealised rent rules. Rent you couldn't recover can be excluded if conditions in the rules are met. If you recover it later, it's taxed in the year received, with a 30% deduction.
- Old vs new regime. Under the old regime, a house property loss can be set off against other income up to Rs 2 lakh a year and carried forward for 8 years. Under the new regime, interest on a let-out property is still deductible, but a house property loss can't be set off against other heads.
Owning more than one flat
Up to two self-occupied homes can have nil annual value. A third is treated as let out, even if empty, and taxed on its expected rent.
Co-owners
Where shares are definite, each co-owner is taxed on their share of the rental income.
For NRI landlords
Tenants paying rent to an NRI must deduct TDS. See TDS on rent paid to an NRI landlord and filing your ITR to claim refunds.
Want rent, receipts and tax papers organised for your CA? Our app keeps every rent invoice and payment proof in one place. Book a video call.
Sources
- TaxGuru: Income from house property under the Income-tax Act, 2025
- Income Tax Department: Let-out house property
- Income Tax Department: Income from house property
- Patron Accounting: House property loss set-off, old vs new regime (April 2026)
General information, not tax advice. Speak to a chartered accountant before filing.
Own a flat in Mumbai while living abroad?
TND Listings manages, sells and helps you buy property across Mumbai, Navi Mumbai and Thane, with one point of contact.
TND Listings is a professional real estate brokerage company serving buyers, sellers, NRIs and Private Institutes. At TND Listings, you are number one. We believe in integrity, commitment to excellence, a professional attitude, and personalised care.
→
Off Veera Desai Road, Andheri West,
Mumbai, Maharashtra 400053 +91 88504 51835
Prabhadevi, Mumbai,
Maharashtra 400025 +91 8850451835
Shakespeare Sarani, Kolkata,
West Bengal 700017 +91 88504 51835
Thakur Village, Kandivali East,
Mumbai, Maharashtra 400101 +91 88504 51835
CIN: U68100MH2025PTC448661
© 2020 – 2026 TND Listings Private Limited, operating under the brands TND Listings and The New Door · CIN U68100MH2025PTC448661 · MahaRERA Agent Reg. No. A51800024511