Short answer: Rent from a house, flat, shop or godown is taxed as "income from house property". You pay tax on the rent minus municipal tax, minus a flat 30% deduction, minus any home loan interest, at your normal slab rate. A tenant who pays more than ₹50,000 a month deducts TDS: 2% if the tenant is an individual, 10% if it is a business. An NRI landlord has 30% TDS plus cess. Rent from farm land used for farming is not taxed. Residential rent has no GST, while commercial rent above the registration limit has 18% GST.
This guide is for owners who rent out a house, flat, shop, office or godown in India, NRIs who rent out property here, and owners who lease farm land. It gives the section numbers of the Income-tax Act, 2025, which applies from 1 April 2026, with the old 1961 Act numbers in brackets. It was checked against the Income-tax Act, 2025, the Finance Act, 2026, CBDT's FAQs on TDS on rent and GST notifications in October 2026. It is general information, not tax advice for your own case.
How rent is taxed
Rent from a building, or land attached to a building, is taxed under the head "Income from house property" (section 20, old section 22). Rent received from 1 April 2026 falls under the 2025 Act; rent for the year to 31 March 2026 is taxed and filed under the 1961 Act.
- Annual value: the rent you received or are owed for the year. If you charge far less than the property could reasonably fetch, the higher figure is used. If the property was empty for part of the year and the rent was lower because of it, the lower actual rent is accepted.
- Minus municipal tax (property tax) that you actually paid in the year.
- Minus 30% of what is left. This standard deduction is allowed whatever you spend; you cannot also claim repairs, painting or insurance (section 22(1)(a), old section 24(a)).
- Minus home loan interest on a loan used to buy, build or repair the property. For a let-out property there is no cap on the interest. Interest from before the year you got the property is claimed in five equal parts.
What remains is added to your other income and taxed at your slab rate.
Example
Kavitha rents out a flat for ₹25,000 a month, or ₹3,00,000 a year. She paid ₹6,000 property tax and ₹1,20,000 of home loan interest in the year.
- Annual value after property tax: 3,00,000 − 6,000 = ₹2,94,000
- 30% standard deduction: ₹88,200
- Loan interest: ₹1,20,000
- Income from house property: 2,94,000 − 88,200 − 1,20,000 = ₹85,800, added to her other income
How much rent is tax-free: under the new tax regime, a resident individual whose total income is ₹12 lakh or less pays no tax because of the rebate in section 156 (old section 87A). So a resident whose only income is rent, with no property tax or loan, pays no tax on rent up to about ₹17.14 lakh a year (₹12 lakh after the 30% deduction). NRIs do not get this rebate.
Joint owners, shops, godowns and land
- Joint owners: co-owners with definite shares are each taxed on their own share of the rent (section 24, old section 26).
- A residential house let out by its owner is always taxed as house property, never as business income (section 26(4)).
- A shop, office or godown building is also house property.
- Furnished or equipped lettings: where a building is let together with machinery, plant or furniture and the two cannot be separated, the whole rent is business income or income from other sources (section 92(2)(g)).
- Vacant land with no building on it is not house property. Its rent is income from other sources, unless it is part of a business (section 92).
- Arrears and late rent: arrears of rent, or rent you could not collect and recover later, are taxed in the year you receive them, after a 30% deduction (section 23).
- Rent you never recover: it is left out of your income if the tenancy was genuine, the tenant has left or you are taking steps to evict them, and you have tried to recover it legally.
Rent from farm land
Rent from land in India that is used for agricultural purposes is agricultural income (section 2(5)(a), old section 2(1A)), and agricultural income is exempt (section 11 and Schedule II). If your net agricultural income is above ₹5,000 and your other income is above the basic exemption limit, the farm income is added only to work out the tax rate on your other income.
The exemption depends on the land being used for agriculture. Land leased for something else, such as a solar plant, a phone tower or a petrol bunk, is not being farmed. Expect that rent to be taxed, and ask a chartered accountant how to report it. Leasing vacant land for cultivation is also exempt from GST. See leasing your land for solar, a mobile tower or a petrol bunk.
Home loan interest and losses
If the interest and deductions are more than the rent, you have a loss from house property.
- Old tax regime: the loss can be set off against salary or other income up to ₹2 lakh a year (section 109(1)(b), old section 71(3A)). The rest is carried forward for up to 8 years, against house property income only.
- New regime (the default): a house property loss cannot be set off against other income. Ask a CA before choosing a regime if you have a large home loan on a rented property.
- Your own home: the interest cap of ₹2 lakh applies only to a house you live in. From 1 April 2026 that cap includes the pre-construction interest.
TDS on rent: what your tenant deducts
| Tenant is an individual or HUF (not audited) | Tenant is a company, firm or audited business | |
|---|---|---|
| Section (2025 Act) | 393(1), Table serial 2(i) (old 194-IB) | 393(1), Table serial 2(ii) (old 194-I) |
| When it applies | Rent above ₹50,000 for a month or part of a month | Rent above ₹50,000 for a month or part of a month |
| Rate | 2% | 10% for land, building, furniture or fittings; 2% for machinery or equipment |
| When it is deducted | Once a year, from the rent for the last month of the year or of the tenancy | Every month, when rent is credited or paid |
| Tenant's forms | Form 141 (old 26QC) with their PAN; no TAN. Certificate Form 132 (old 16C) | Quarterly Form 140 (old 26Q). Certificate Form 131 (old 16A) |
Other points from the CBDT FAQs on TDS on rent:
- No surcharge or cess: neither is added to these rates.
- Joint owners: where the shares are definite, the ₹50,000 limit applies to each owner separately.
- No PAN: if you do not give your PAN, the rate rises to 20%. For an individual tenant, it cannot exceed one month's rent.
- No tax due: a resident individual landlord whose tax is nil can give a business tenant a declaration on Form 121 (old 15G or 15H). Any landlord can apply for a lower or nil deduction certificate on Form 128 (old Form 13).
- Your credit: the TDS shows in your Annual Information Statement, and you claim it in your return.
If you are an NRI landlord
- The TDS: your tenant deducts under section 393(2), Table serial 17 (old section 195), from every rent payment, with no ₹50,000 limit.
- The rate: 30%, plus 4% cess (31.2% in all), and a surcharge on very large payments (Finance Act, 2026, First Schedule Part II).
- Your tenant's filing: the tenant needs a TAN, files the quarterly Form 144 (old 27Q) and gives you Form 131. The October 2026 change that lets buyers of property from NRIs use their PAN does not cover rent.
- Lower or nil TDS: to have less deducted, apply on Form 128 for a lower or nil deduction certificate. From 1 April 2026 it can also be applied for electronically (section 395(6)). Then file a return to claim the 30% deduction, the interest and any refund.
- Sending the rent abroad: this needs Form 145 (old 15CA) and, above ₹5 lakh in a year without an officer's certificate, a chartered accountant's Form 146 (old 15CB).
- The USD 1 million limit: the RBI treats rent as current income, so it can be sent abroad from your NRO account apart from that limit, which applies to other NRO balances.
Rent can also be credited to an NRE account once tax has been deducted or paid.
GST on rent
| What you rent out | GST |
|---|---|
| A house or flat for someone to live in | Exempt |
| A house or flat let to a GST-registered tenant | The tenant pays 18% under reverse charge (since 18 July 2022, notification 05/2022). Still exempt if the tenant is a sole proprietor renting it as his own home (since 1 January 2023, notification 15/2022) |
| A shop, office, godown or land for business | 18% (9% CGST and 9% SGST, heading 9972). The September 2025 GST Council changes did not touch it (56th Council) |
| Commercial property let by an unregistered landlord to a registered tenant | The tenant pays the GST under reverse charge, since 10 October 2024 (notification 09/2024), unless the tenant is in the composition scheme |
| Vacant land leased for farming | Exempt |
You need GST registration when your aggregate turnover passes ₹20 lakh in a year in Tamil Nadu and most states (₹10 lakh in special category states), under section 22 of the CGST Act. Exempt residential rent counts towards that ₹20 lakh. But a landlord who rents out only homes, or whose only taxable rent is paid by registered tenants under reverse charge, does not have to register.
Filing your return
- ITR-1: for tax year 2026-27, a resident with up to two house properties, no house property loss to carry, total income up to ₹50 lakh and farm income up to ₹5,000 can use ITR-1.
- ITR-2: NRIs, and residents who do not fit ITR-1, use ITR-2 if they have no business income.
- Due date: 31 July after the end of the tax year (31 August if you have business income without an audit).
- Advance tax: if your total tax for the year is ₹10,000 or more, pay it in instalments by 15 June, 15 September, 15 December and 15 March, since no employer deducts tax on rent.
- Papers to keep: the rental agreement, a record of rent received, property tax receipts, the loan interest certificate, and the tenant's TDS certificates.
For the agreement itself in Tamil Nadu, see the Tamil Nadu Rent Act and rental agreement rules, and for finding a tenant, how to find tenants without a broker.
Rent out with Gmore: a filmed listing and no brokerage
Gmore films your property professionally, lists it with the video in the Gmore app and on gmore.app, and alerts tenants searching nearby when it goes live. Tenants call you directly. You pay one flat fee, shown before you pay, and no brokerage. Rent out your property with Gmore, or for a shop, office or godown, rent out commercial property.
Checked against the Income-tax Act, 2025, the Finance Act, 2026, the Income-tax Rules, 2026, CBDT's FAQs on TDS on rent, GST notifications and the RBI's Master Direction in October 2026. Written by the Gmore team. Tax rules change; check with a chartered accountant for your own case.
