Verified against the Act text on 9 September 2026. Every figure below carries a numbered source; the documents are listed at the end. This is general information, not tax advice — confirm your own position with a chartered accountant before you file or deduct.

Rental income tax in India changed its rulebook on 1 April 2026. The Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025, which applies from tax year 2026-27 onwards [1][2]. The rules for landlords are substantially the same, but the section numbers, the forms and even the vocabulary ("tax year" replaces "financial year" and "assessment year") are new [2]. If you are reading older guides — including the earlier version of this one — the references no longer match the law.

1. How rent is taxed: the four-step calculation

Rent is taxed under the head "Income from house property" — Sections 20 to 25 of the 2025 Act (Sections 22 to 27 of the old Act) [3].

  1. Start with the annual value — broadly, the rent received or receivable for the year (Section 21) [3][4].
  2. Subtract municipal taxes you actually paid in the year (holding tax in Bhubaneswar). Only the owner's payments count, and only when paid — Section 21(3) [4].
  3. Subtract a flat 30 % of that reduced annual value — Section 22(1)(a). It is a standard deduction for repairs and upkeep and is allowed whether you spent anything or not [5].
  4. Subtract interest on money borrowed to buy, build, repair or reconstruct the property — Section 22(1)(b). For a let-out property there is no cap on this interest [5][6]. Interest paid during construction is allowed in five equal annual instalments starting from the year of completion — Section 22(1)(c) [5].

Worked example. Flat in Patia let at ₹25,000 a month: annual value ₹3,00,000. Holding tax paid ₹6,000 → ₹2,94,000. Less 30 % (₹88,200) → ₹2,05,800. Less home-loan interest ₹1,50,000 → taxable house-property income ₹55,800, on a flat that actually collected ₹3,00,000.

2. The limits that do apply

  • Self-occupied house. Up to two houses you live in (or cannot occupy because you work elsewhere) have a nil annual value — Section 21(6)–(7) [4]. Interest on them is capped at ₹2,00,000 in total, and only if the purchase or construction was completed within five years of borrowing and you hold the lender's interest certificate; otherwise ₹30,000 — Section 22(2) [5].
  • Loss set-off. If interest exceeds the rent and creates a house-property loss, the amount you can set off against salary or other income in the year stays capped at ₹2,00,000; the balance carries forward for eight years against house-property income [6][7].
  • New tax regime (Section 202, formerly 115BAC). If you are in the new regime: interest on a let-out property is still deductible, interest on a self-occupied house is not, and a house-property loss cannot be set off against any other head of income at all [7]. For a landlord with a large loan on a let-out flat, this single rule can decide which regime is cheaper.
  • Arrears and unrealised rent recovered later are taxed in the year received, with the same 30 % deduction — Section 23 [6].
  • Co-owners are taxed on their definite share separately — Section 24 [6].

3. TDS on rent: who deducts, how much, when

All TDS provisions now sit in one section, Section 393, as a table [8][9]. Two rows cover rent paid to a resident landlord. The Act's own wording [8]:

  • Row 2(i) — "person other than specified person" (an individual or HUF tenant not covered by the audit thresholds; the old Section 194-IB): rate 2 %, threshold "₹50,000 for a month or part of a month". The Act's note says the deduction is made "for the last month of the tax year or the last month of tenancy", whichever is earlier — so a salaried tenant deducts once a year, in March, or when moving out [8].
  • Row 2(ii) — "specified person" (companies, firms and audited businesses; the old Section 194-I): 10 % for land, building or furniture, 2 % for machinery, plant or equipment, same ₹50,000-a-month threshold, deducted on each credit or payment [8][9].

Two continuities from the old law carry forward: the ₹50,000-a-month line was set by the 2024 and 2025 Finance Acts (the individual-tenant rate fell from 5 % to 2 % on 1 October 2024, and the business threshold rose to ₹6 lakh a year, i.e. ₹50,000 a month, from 1 April 2025), and a landlord who does not furnish PAN suffers deduction at 20 % [9][10].

The forms have changed. An individual or HUF tenant no longer files Form 26QC. Under the Income-tax Rules, 2026 the PAN-based challan-cum-statement is Form 141, due within 30 days of the end of the month of deduction, with no TAN needed; the TDS certificate the tenant gives you is Form 132 (formerly Form 16C), due within 15 days of the Form 141 deadline [11][12]. Check that the credit appears in your Form 26AS / AIS before you file.

Worked example. Individual tenant pays ₹60,000 a month, so ₹7,20,000 in the tax year. In March the tenant deducts 2 % of the year's rent — ₹14,400 — from the March payment, files Form 141 by 30 April and hands over Form 132. You declare ₹7,20,000 as annual value and claim the ₹14,400 as tax already paid.

4. Rent paid to an NRI landlord

Rent to a non-resident falls under Section 393(2) (the old Section 195): no threshold, deduction from the first rupee, at the rates in force — for an individual landlord, 30 % plus applicable surcharge and cess — and the tenant needs a TAN and files the quarterly non-resident statement, now Form 144 (formerly 27Q) [13]. The landlord can reduce this with a lower- or nil-deduction certificate from the assessing officer, or by claiming treaty (DTAA) relief with a tax residency certificate [13]. The NRI still files an Indian return and claims the credit; the effective tax after the 30 % and interest deductions is usually far below what was withheld.

5. What to keep, and the monthly habit that makes filing painless

Keep, for every property: the rent agreement, every rent receipt, the holding-tax receipts, the lender's annual interest certificate, and each tenant's Form 132 (or the old Form 16C for the 2025-26 year). Reconcile rent received, expenses and TDS credited every month, and the annual return is a ten-minute check rather than a reconstruction. If NavoAsset manages the property, the monthly statement already carries the rent, deductions and remittance for the month, so this file builds itself.

Related guides

Old law to new law — the mapping used above

  • Sections 22–27 (1961) → Sections 20–25 (2025): income from house property [3]
  • Section 24(a) → Section 22(1)(a): 30 % standard deduction [5]
  • Section 24(b) → Section 22(1)(b)–(c) and 22(2): interest [5]
  • Section 115BAC → Section 202: new tax regime [7]
  • Section 194-IB → Section 393(1), Table Sl. 2(i); Section 194-I → Table Sl. 2(ii) [8]
  • Section 195 → Section 393(2) [13]
  • Form 26QC → Form 141; Form 16C → Form 132; Form 27Q → Form 144 [11][12][13]

Proof: the documents behind each statement

  1. Government of India, Income-tax Act, 2025 receives President's assent; effective 1 April 2026 — newsonair.gov.in.
  2. Income Tax Department, Income-tax Act, 2025 [30 of 2025], as amended by the Finance Act, 2026 — official consolidated text — incometaxindia.gov.in (PDF); department landing page incometaxindia.gov.in/income-tax-act-2025.
  3. Comparative reading of Sections 22–27 (1961) and 20–25 (2025) — TaxGuru.
  4. Section 21, Determination of annual value — clause-by-clause analysis, sub-sections (3), (6), (7) — TaxTMI.
  5. Section 22, Deductions from income from house property — section text — eztax.in (Act text); also Indian Kanoon.
  6. FAQs on income from house property under the 2025 Act (let-out interest uncapped, arrears, co-owners) — TaxGuru.
  7. Section 202 (new tax regime) — treatment of house-property interest and loss — Ebizfiling.
  8. Section 393(1), Table, Sl. No. 2 (rent) — Act text with the "last month of the tax year or the last month of tenancy" note — Indian Kanoon.
  9. Clause 393(1) Table 2(i)–(ii) versus Section 194-I — analysis — TaxTMI.
  10. Section 194-IB (1961 Act) — department page recording the 2 % rate — incometaxindia.gov.in.
  11. Form 141, challan-cum-statement under Section 393(1); Rules 218–219, Income-tax Rules, 2026; Form 132 certificate — TaxTMI guidance note.
  12. Form 141 — what it replaces (26QB/26QC/26QD/26QE) — TaxGuru.
  13. Section 393(2) — payments to non-residents: 30 % plus surcharge and cess on rent, Form 144 (old 27Q), Forms 145/146 (old 15CA/15CB) — TDSMAN.

Rates, thresholds and form numbers are as in force on 9 September 2026 for tax year 2026-27. They change with each Finance Act. Where the official Act text and a secondary source disagreed during verification, the Act text was used.