tax on house rental income

Income Tax for House Rental 

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House Rental Income  

Maximize your rental income and calculate your tax on Income from House Property today with Tax Robo.

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Income From House Property Under Income Tax Act, 1961 

a. Self-Occupied Property

Self-Occupied property is used for residential purposes. This could be the family of the Taxpayer - the parents and / or spouse and children. An unoccupied house building is considered to be your own for the purpose of Income Tax.

b. Let-Out Property

A building that is leased for a year or part of it is deemed to have been evicted for Income Tax purposes

c. Inherited Property

Inherited property ie. one that is shared by parents, grandparents, etc. also, may be yours or exempt depending on its use as described above.

Steps to Calculate Income From House Property in India

Here's how to put one together for use in your home:

Step 1: Find the Gross Annual Value Annual Property Value (GAV) of the area

Total annual real estate is zero. Property rented is a rent that is collected for a rented house.

Step 2: Reduce Property Tax

Property Tax, if paid, is permitted as a GAV deduction.

Step 3: Determine Proper Annual Amount (NAV):

Annual Amount = Total Annual Amount - Property Tax

Step 4: Reduce 30% of NAV in respect of standard deductions

30% of NAV is permitted as a deduction from NAV under Section 24 of the Income Tax Act. No other costs such as drawing and repairs may be required as Tax relief in excess of the 30% cap under this category.

Step 5: Reduce home lending interest

A Section 24 deduction is available at interest-paid annual interest on a home loan

Step 6: Determine Income from House Property

The amount that arises is your household income. This is Taxable at the rate the lab works for you.

Step 7: Loss of House Property

If you are the owner of the house you are living in, as its GAV is Nil, claim that the deduction of interest on the mortgage loan will result in the loss of the property. These losses can be reversed compared to the revenue from other heads.

Income Tax Deductions on Home Loans

a. Tax Credit on Home Loan Interest: Section 24

Home owners may want to deduct upto Rs. 2 lakhs interest on their home loan, if the owner or his or her family lives in the house. The same treatment applies if the house is empty. Once you have rented the property, all interest on the home loan is allowed to be deducted.

However, your interest deductions are limited to Rs. 30,000 instead of Rs. 2 lakhs if both of the following conditions are met:

  • The loan is taken on or after 1 April 1999
  • Purchase or construction is not completed within five years from the end of FY where the loan has been secured

Tax Deductions on Principal Repayments

The principal deduction fee is available upto Rs. 1,50,000 within the general limit of Section 80C See the principal payment amount with your lender or view your loan installment details.

Tax Deduction for First-Time Home owner: Section 80EE

Section 80EE recently introduced in the Income Tax Act provides home owners, only one property on the day of the loan approval, with a Tax benefit of upto Rs. 50,000.

Tax Robo helps you file your house rental income Tax easily.

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Five Main Heads of Income 

Income from Salary

  1. Salary is defined as the remuneration that a person receives periodically for rendering services based on an implied or express contract.
  2. The Salary for the purpose of calculation of income from Salary includes:
  • Wages
  • Pension
  • Annuity
  • Gratuity
  • Advance Salary paid
  • Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
  • Annual accretion to the balance of Recognized Provident Fund
  • Leave Encashment
  • Transferred balance in Recognized Provident Fund
  • Contribution by Central Govt. or any other Employer to Employees Pension A/c as referred in Sec. 80CCD.

Income from House Property

i. Basis of Charge [Section 22]:

  • Income from house property shall be Taxable the house property should consist of any building or land.

ii. The Gross Annual Value of the house property shall be higher of following:

  • Expected rent
  • Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy

iii. Deductions

Municipal Taxes

Standard Deduction [Section 24(a)]

30% of net annual value of the house property is allowed as deduction

Interest on Borrowed Capital [Section 24(b)]

Let-out property - Actual interest incurred on capital borrowed

Self-occupied property - Interest incurred on capital borrowed allowed as deduction upto Rs. 2 lakhs. The deduction shall be allowed acquisition or construction of house property is completed within 5 years.

Maximum loss set off allowed in a Financial Products year is limited upto Rs. 2 lakhs, remaining loss can be carried forward to future years, 8 years in total

Income from Capital Gains

Any Income derived from a Capital asset movable or immovable is Taxable under the head Capital Gains under Income Tax Act, 1961.
Short Term Capital Gains:
  • Sold a Capital asset within 36 months and Shares or securities within 12 months of its purchase then the gain arising out of its sales after deducting there from the expenses of sale (Commission etc) and the cost of acquisition and improvement is treated as short term capital gain and is included in the income of the Taxpayer.

Taxability of short term capital gains:

  • Section 111A of the Income Tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction Tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to Tax @10% upto assessment year 2008-09 and 15% from assessment year 2009-10 onwards.
Long Term Capital Gain
  • A Capital Asset held for more than 36 months and 12 months in case of shares or securities is a long term capital asset and the gain arising there from is a long term capital gain. Long term capital gains are arrived at after deducting from the net sale consideration of the long term capital asset the indexed cost of acquisition and the indexed cost of improvement of the asset.

Taxation of Long term capital gains

  • The long term capital gains are Taxed @ 20% after the benefit of indexation as discussed above. No deduction is allowed from the long term capital gains from Section 80C to 80U. But in case of individual and HUF where the Income is below the basic exempted limit the shortage in basic exemption limit is adjusted against the long term capital gains.

Income from Profits and Gains of Business or Profession

Under Section 28, the following income is chargeable to Tax under the head "Profits and Gains of Business or Profession":

  • Profits and Gains of any Business or Profession.
  • Any compensation or other payments due to or received by any person specified in Section 28(ii).
  • Income derived by a trade, professional or similar association from specific services performed for its members.
  • The value of any benefit or perquisite, whether convertible into money or not, arising from Business or the exercise of a Profession.
  • Any interest, salary, bonus, commission or remuneration received by a partner from firm .
  • Fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner.
  • Income from speculative transaction.

Income from Other Sources

"Income From Other Sources" is any income which is not specifically Taxed under any other head of income will be

  • Taxed under this head.
  • Section 56(2)(i), Dividends
  • Winnings from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form whatsoever, are always Taxed under this head.
  • Interest Income
  • Gifts received by an individual

Advantages of Filing Income Tax (IT) Returns


  • No Benefits In Future For Mere Filing Of NIL Income Tax Return.
  • Tax Returns Are Now Eligible Documents.

Tax Planning

  • Plan & Save Your Income Tax Payment


  • Carry Forward Loss Only The Return Filed Before The Due Date
  • Do Not Claim Wrong Income Tax Refunds


  • Compare The Services Not Cost Of Filing Income Tax Returns.
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Document Required for E-Filing Income Tax Return

Proof of Income

  • Form 16 Copy – Part A & Part B
  • Fixed Deposits
  • Capital Gain Statement Share Broking
  • FD Interest Certificate
  • Invoice Copy
  • Contract Copy

Proof of Deduction

  • Life Insurance Premium
  • Medical Insurance Premium
  • School Fees Receipts
  • House Property Tax
  • Interest Certificate Housing Loan
  • Tax Savings Documents
  • Additional Deduction Documents

This may come as a surprise but you don't need any documents or proofs to attach with your Income Tax Returns.

All you need is your Aadhar ID linked with your PAN.

You need documents ONLY IF YOU SEEK TO CLAIM DEDUCTIONS while filing Income Tax.

You DO NOT NEED TO ATTACH ANY DOCUMENTS in your IT return application. Fill your Income Tax return honestly and claim deductions that genuinely apply to your application.

You may need documents only if an Income Tax assessing officer sends you a notice asking you to present those documents before them. Till then, procure all the documents that may be needed and keep them safe.

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