How to report rental income in your ITR
Rent from a property you own is taxed under the head Income from House Property. You start with gross annual value, subtract municipal taxes actually paid during the year to reach net annual value, then take a flat 30% standard deduction under Section 24(a) and any interest on borrowed capital under Section 24(b). What remains is added to your total income and taxed at your slab rate.
Rent collected is the starting point, not the taxable figure
Landlords routinely overpay because they treat the year's rent as the amount to be taxed. It is not. Rental income from a property you own falls under Income from House Property, and that head has a prescribed computation with two substantial deductions built into it, one of which needs no receipts at all.
The sequence matters, because each step operates on the output of the previous one. Taking the 30% deduction on gross rent instead of on net annual value is the most common arithmetic error, and it produces the wrong answer in the department's favour or yours depending on your municipal tax.
The computation, in order
- Gross Annual Value. For a let-out property this is normally the rent received or receivable for the year, compared against a notional expected rent, with the higher figure taken.
- Less municipal taxes. Property tax paid to the local body during the year is deductible, but only if the owner actually paid it in that year. Amounts merely due, or paid by the tenant, do not count.
- That gives Net Annual Value.
- Less 30% of net annual value under Section 24(a). A flat statutory allowance for repairs and maintenance that needs no bills and does not depend on what you spent.
- Less interest on borrowed capital under Section 24(b), where you took a loan for the property.
- The result is your income from house property, which goes into your total income and is taxed at your slab rate.
A worked example
A flat let at ₹30,000 a month, municipal tax of ₹12,000 paid during the year, and ₹1,50,000 of interest on a home loan.
| Step | Amount |
|---|---|
| Gross annual value (₹30,000 × 12) | ₹3,60,000 |
| Less municipal taxes paid | −₹12,000 |
| Net annual value | ₹3,48,000 |
| Less 30% standard deduction under Section 24(a) | −₹1,04,400 |
| Less interest under Section 24(b) | −₹1,50,000 |
| Income from house property | ₹93,600 |
₹3,60,000 of rent collected becomes ₹93,600 of taxable income. Nothing here is aggressive planning; it is the ordinary computation.
Deposits, arrears and co-owners
A refundable security deposit is not income. You are holding the tenant's money and you owe it back, so it does not enter the computation. An amount that is non-refundable, or that you adjust against rent, is a different matter and takes the character of what it actually is.
Rent you never received is a genuine problem, and the law does contemplate it: unrealised rent can be excluded from the computation, but only where prescribed conditions are satisfied, which broadly require that the tenancy was real, the tenant has vacated or steps have been taken to recover, and recovery is genuinely doubtful. Simply not having been paid is not enough on its own.
Where a property is jointly owned with definite shares, the income is taxed in each owner's hands in proportion to their share, not bundled into one return. The deductions follow the same proportion.
Free tools you can use
Rental income tax FAQ
How is rental income taxed in India?
Under the head Income from House Property. You take gross annual value, subtract municipal taxes actually paid during the year to get net annual value, then deduct a flat 30% of that under Section 24(a) and any interest on borrowed capital under Section 24(b). The balance is added to your total income and taxed at your slab rate.
Is the 30% deduction calculated on the rent I received?
No, and this is the most frequent error. The 30% is computed on net annual value, which is gross annual value after deducting municipal taxes paid during the year, not on the gross rent.
Is a security deposit taxable as rental income?
A refundable security deposit is not income, because it is the tenant's money that you are obliged to return. An amount that is non-refundable, or that is adjusted against rent, is treated according to its real character and can be taxable.
Can I deduct repairs, painting and society maintenance separately?
Not in addition to the 30%. The Section 24(a) deduction is a flat statutory allowance that stands in place of actual repair and maintenance costs, so you get it whether you spent nothing or a great deal, but you cannot claim your actual bills on top of it.
What if my tenant did not pay the rent?
Unrealised rent can be excluded from the computation where the prescribed conditions are met, which broadly require a genuine tenancy, the tenant having vacated or steps having been taken to recover the amount, and recovery being doubtful. Non-payment by itself does not automatically remove it from your income.
How is rental income taxed when a property is jointly owned?
Where the shares are definite and ascertainable, each co-owner is taxed on their own share of the income in their own return, with the deductions applied in the same proportion, rather than the whole amount being taxed in one person's hands.
On RentStalk
Provisions referred to
- The Income-tax Act, 1961 — Sections 22 to 27 (income from house property)
- The Income-tax Act, 1961 — Section 24 (deductions from income from house property)
- The Income-tax Rules, 1962 — Rule 4 (unrealised rent)
This is general information about Indian tax law, not tax advice. Return-form eligibility and deduction rules change between assessment years, and your position depends on facts this page cannot know. Confirm the current position on incometax.gov.in or with a qualified chartered accountant.