Frequently Asked Questions
How is rental income taxed in India? ＋
Rental income is taxed under the head "Income from House Property". The Gross Annual Value (annual rent) less municipal taxes gives Net Annual Value (NAV). A standard deduction of 30% of NAV is allowed. Home loan interest (no limit for let-out property) is then deducted. The balance is taxable at your slab rate.
What is the 30% standard deduction on rental income? ＋
Section 24(a) allows a flat 30% deduction on Net Annual Value (NAV) towards repairs and maintenance. This deduction is available regardless of actual expenditure. No bills or invoices are needed for this deduction.
Is there a limit on home loan interest deduction for let-out property? ＋
No. For a let-out property, there is no cap on home loan interest deduction under Section 24(b). You can claim the full interest paid. This is different from self-occupied property where the limit is ₹2 lakh per year.
What is municipal tax and how does it reduce rental income tax? ＋
Municipal taxes (property tax) paid to local authorities are fully deductible from Gross Annual Value to arrive at Net Annual Value. Keep receipts of municipal tax payments as they reduce your taxable rental income.
Can rental income losses be set off against salary? ＋
Loss from house property (when interest exceeds rental income after 30% deduction) can be set off against salary or other income up to ₹2 lakh per year. Balance losses can be carried forward for 8 years.