The 30% deduction you get without a single receipt, the interest rules that changed shape under the new regime, the tenant’s TDS, the NRI landlord’s 31%, the GST trap on corporate lets — worked on a real ₹1.5 lakh-a-month South Delhi floor.
Tax on rental income in India works in three moves: take the annual rent (gross annual value), subtract municipal taxes you paid, then subtract a flat 30% standard deduction — no receipts needed — and home-loan interest on the let-out property. What remains is added to your income and taxed at your slab: for FY 2026–27, nil to ₹4 lakh rising to 30% above ₹24 lakh under the default new regime. On a ₹1.5 lakh/month South Delhi floor, a top-slab landlord keeps roughly ₹14.1 lakh of the ₹18 lakh rent after ≈₹3.87 lakh tax. Tenants paying over ₹50,000/month deduct 2% TDS; tenants of NRI landlords deduct ~31.2%.
Rental yield conversations in South Delhi obsess over the gross number and ignore the tax architecture underneath it — which is generous, mechanical and full of small traps. Accordingly, here is the whole computation in the order the return asks for it, plus the three flows most landlords get wrong: the tenant’s TDS, the NRI withholding, and GST on renting to a company. The rent agreement itself has its own rulebook; this page is about what the rent becomes after it reaches you.
| Step | Line | Amount |
|---|---|---|
| 1 | Gross annual value (12 × ₹1,50,000) | ₹18,00,000 |
| 2 | Less: MCD property tax paid by owner | − ₹30,000 |
| 3 | Net annual value | ₹17,70,000 |
| 4 | Less: standard deduction @30% | − ₹5,31,000 |
| 5 | Less: home-loan interest on this let-out floor (if any) | − as paid |
| 6 | Income from house property (no loan case) | ₹12,39,000 |
| 7 | Tax at 30% marginal + 4% cess | ≈ ₹3,86,600 |
| Taxable income | Rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4–8 lakh | 5% |
| ₹8–12 lakh | 10% (rebate makes tax nil up to ₹12L total income) |
| ₹12–16 lakh | 15% |
| ₹16–20 lakh | 20% |
| ₹20–24 lakh | 25% |
| Above ₹24 lakh | 30% (+ surcharge where applicable, + 4% cess) |
Interest on a loan against a let-out property is deductible in full against the rent under both regimes. The difference is what happens if interest exceeds the rent and creates a loss: under the old regime, up to ₹2 lakh of house-property loss can be set off against salary or other income (balance carried forward); under the default new regime, that loss cannot be set off against other heads or carried forward. Landlords with big loans on financed floors should run both regimes before filing — it is the one place the choice still moves real money on rental income.
An individual tenant paying more than ₹50,000 a month deducts 2% TDS from the rent and deposits it against your PAN via the challan-cum-statement, once a year or at exit. It is your money — a prepaid credit that appears in your 26AS/AIS — so reconcile it before filing rather than discovering it as a mismatch notice.
If the owner is an NRI, the tenant must withhold at 30% plus cess (≈31.2%, plus surcharge at higher incomes) from the first rupee under the Section 195 regime — there is no ₹50,000 threshold. A lower-deduction certificate can reduce it; the mechanics mirror those in our NRI seller’s guide.
Renting a home to an individual for personal residence is GST-exempt. Rent it to a GST-registered entity — the corporate guest house, the startup’s founder flat on the company’s books — and 18% GST applies on reverse charge, paid by the tenant. Price the lease knowing which side of that line your tenant sits on.
The 30% deduction is the most generous line in the Act. The mistakes happen everywhere around it.
Finally, keep the ownership paperwork aligned with the tax: co-owned floors split the rent (and the deductions) by ownership share; rent received by the non-owner spouse invites clubbing questions; and an unadjusted security deposit is not income until adjusted against rent or damages. Whether the yield itself justifies holding rather than selling is a different question — the one our rent vs buy analysis answers with South Delhi’s actual numbers — and what your tenancy can and cannot legally do is the province of the Delhi Rent Control Act.
A flat 30% of the net annual value, allowed automatically to cover repairs and maintenance — regardless of what you actually spent, with no bills. You cannot claim actual repair costs instead; the 30% is the deal.
Yes — interest on a loan for a let-out property is deductible in full against the rental income under both regimes. If it creates a loss, only the old regime lets you set off up to ₹2 lakh against other income and carry the balance forward.
Individual tenants paying above ₹50,000 a month deduct 2% and deposit it against your PAN via the challan-cum-statement. Businesses deduct under their own TDS provisions. Either way it is your prepaid tax — claim the credit in the return.
The tenant withholds roughly 31.2% (30% + cess, plus surcharge at high incomes) from every payment, with no threshold, and files the non-resident TDS compliance. A lower-deduction certificate from the department can bring the rate down to the landlord’s true liability.
Not on renting a residential dwelling to an individual for personal residence. If the tenant is GST-registered — a company or firm taking the flat on its books — 18% GST applies under reverse charge, payable by the tenant. Commercial lets are taxable at 18% in the usual way.
A genuinely let-but-vacant property is taxed on the rent actually received or receivable for the year. A second self-occupied home carries nil annual value (up to two are allowed); additional homes beyond that are taxed on deemed rent even if empty.
Each co-owner is taxed on their defined share of the rent, each with their own 30% deduction and slabs — often a meaningful saving for spouses who genuinely co-own. The shares follow the deed, not convenience.
A refundable deposit is not income when received. It becomes taxable only if and when adjusted against unpaid rent or damages. Non-refundable amounts and advance rent are taxable as rent of the relevant year.
With no property loan the new regime usually wins on rates. With heavy let-out interest creating a loss, the old regime’s ₹2 lakh set-off can flip the answer — compute both before the filing deadline rather than defaulting.
Send us the colony, the rent and your slab — we’ll return the honest net yield, the TDS flows, and whether letting or selling serves you better this year.
Positions reflect law in force in July 2026 for FY 2026–27 — house-property computation with municipal-tax and 30% standard deductions, let-out interest fully deductible with the ₹2 lakh loss set-off confined to the old regime, new-regime slabs unchanged by Budget 2026 with the rebate covering total income to ₹12 lakh, tenant TDS at 2% above ₹50,000/month, non-resident withholding under the Section 195 regime, and GST exemption for residential lets to individuals with 18% reverse charge for registered tenants. Section numbering migrates under the Income-tax Act, 2025; substance is unchanged. Verify current provisions at incometaxindia.gov.in and with your CA before filing.
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