People who became landlords by circumstance, not design

Accidental landlords, those who inherited a home, moved for work, divorced, or could not sell, who need the house-property rules without the jargon, and the reliefs they are owed.

If you let a property by circumstance rather than as a business, rental income is taxed under house property: you take the net annual value (rent less municipal taxes paid), then a flat 30% standard deduction under Section 24(a), then home-loan interest under Section 24(b). The key relief: once a property is let out, all the loan interest is deductible (the Rs 2 lakh cap applies only to a self-occupied home), though a resulting house-property loss can be set off against other income only up to Rs 2 lakh. Your tenant's TDS on the rent fell to 2% (from 5%) on 1 October 2024 under Section 194-IB. If you later sell, Sections 54 and 54F can roll the gain into a new home (capped at Rs 10 crore).

Last reviewed: 22 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

Most landlords in India did not set out to be landlords, they inherited a home, moved for work, divorced, or simply could not sell. The house-property rules still apply, and they contain reliefs worth knowing. This page maps them to the real situations that create accidental landlords.

How the rental income is computed

Take the gross annual value (the higher of the actual rent or the reasonable expected rent, less any bona-fide vacancy), subtract the municipal taxes you actually paid to get the net annual value, then take the flat 30% standard deduction under Section 24(a) (a deemed allowance for repairs, claimed regardless of actual spend) and the home-loan interest under Section 24(b). There is no separate deduction for actual repairs, brokerage or maintenance, the 30% covers them. Compute the municipal taxes as a separate subtraction before the 30%, not inside it.

House-property income is net annual value (rent less municipal taxes paid) less the flat 30% standard deduction (24(a)) and home-loan interest (24(b)). (Income-tax Act 1961 ss.22-24 (house-property income) (Income-tax Act 2025 ss.20-22))

Let-out interest is uncapped, and the 2% tenant TDS

The Rs 2 lakh cap on home-loan interest applies only to a self-occupied house. Once the property is let out, all the loan interest is deductible against the rent, though if that produces a loss from house property, the set-off against your other income is capped at Rs 2 lakh (the excess carries forward up to eight years). On the collection side, a salaried or other individual tenant paying rent of more than Rs 50,000 a month must deduct TDS under Section 194-IB, and that rate fell from 5% to 2% on 1 October 2024 (a company or firm tenant deducts 10% under Section 194-I).

All loan interest on a let property is deductible (the Rs 2 lakh cap is self-occupied only); an individual tenant paying over Rs 50,000/month deducts 2% TDS under 194-IB (from 1 October 2024). (Income-tax Act 1961 s.24(b) (let-out interest) + s.71 (Rs 2 lakh loss set-off); s.194-IB (2% from 1 October 2024) (Income-tax Act 2025 s.393))

Inherited and transferred homes, and selling later

Common archetypes follow the same rules: an inherited home let out is taxed in the ownership ratio, with the cost and holding period taken from the previous owner (so a loan to buy out siblings or renovate gives 24(b) interest); a self-occupied home let after a job transfer becomes fully interest-deductible; a divorce-settlement property is taxed on whoever owns it per the order. If you sell, the long-term gain (held over 24 months) is taxed at 12.5% without indexation (or the old 20%-with-indexation method for a resident on property bought before 23 July 2024), and you can roll it into a new home under Section 54 (or 54F), exemption capped at Rs 10 crore.

Inherited property takes the previous owner's cost and holding period; a long-term sale gain is 12.5% without indexation, rollable into a new home under Section 54/54F (capped at Rs 10 crore). (Income-tax Act 1961 s.49 (cost on inheritance) + s.112 (LTCG, FA2024) + ss.54/54F (rollover, Rs 10 crore cap))

Support schemes and tax treatment

Section 24(b) let-out interest

Eligibility: Let-out property with a home loan

Tax treatment: Full interest deductible (no Rs 2 lakh cap); loss set-off capped at Rs 2 lakh

Section 54 / 54F rollover

Eligibility: Reinvesting a long-term gain into a residential house

Tax treatment: Gain exempt to the extent reinvested, capped at Rs 10 crore

GST exemption (residential)

Eligibility: Residential dwelling let for residence

Tax treatment: Exempt (no GST registration just for residential rent)

Allowable expenses in context

Under house property you do not deduct actual repairs, maintenance or brokerage, the flat 30% standard deduction covers them; the only further deduction is home-loan interest. Note one GST nuance: letting a residential dwelling for residence is exempt, but letting a residential property to a GST-registered person for business use can attract reverse charge on the tenant, and commercial letting is taxable (register over the threshold).

Worked example

Priya — Chennai, TN

salaried professional who moved cities and let her flat (2026-27)

Priya moved for work and let out the flat she still has a home loan on, for Rs 55,000 a month. Her tenant is a salaried individual.

Because the flat is now let, all her loan interest is deductible against the rent (the Rs 2 lakh self-occupied cap no longer applies), and if that creates a house-property loss, she can set off Rs 2 lakh against her salary and carry forward the rest. She computes income as: gross rent, less municipal taxes paid, less the 30% standard deduction, less the full loan interest. Because the rent exceeds Rs 50,000 a month, her individual tenant deducts TDS at 2% under Section 194-IB (down from 5% since October 2024), which she reclaims in her return. She files ITR-2 (no business income).

Frequently asked questions

How is income from a let property taxed?+

Under house property: you take the net annual value (the rent, less municipal taxes you actually paid), then a flat 30% standard deduction under Section 24(a) for repairs (whether or not you spend it), and deduct home-loan interest under Section 24(b). You do not separately deduct repairs, maintenance or brokerage, the 30% covers them. The result is added to your income and taxed at your slab rate.

Can I deduct all my home-loan interest if I rent the flat out?+

Yes. The Rs 2 lakh interest cap applies only to a self-occupied home. Once the property is let, all the loan interest is deductible against the rent. If that produces a loss from house property, you can set off only Rs 2 lakh against your other income in the year, carrying the rest forward for up to eight years. This is a real advantage of letting over keeping it self-occupied.

How much TDS does my tenant deduct?+

If your tenant is a salaried or other individual (not subject to audit) paying rent of more than Rs 50,000 a month, they deduct TDS under Section 194-IB, and that rate dropped from 5% to 2% on 1 October 2024. A company, firm or LLP tenant deducts 10% under Section 194-I. You reclaim the TDS in your return. Make the tenant's deduction responsibility clear in the lease.

What if I sell the property later?+

A long-term gain (property held over 24 months) is taxed at 12.5% without indexation, or, for a resident who bought before 23 July 2024, the old 20%-with-indexation method if it is lower. You can defer or save the tax by rolling the gain into a new residential house under Section 54 (or 54F for a non-house asset), with the exemption capped at Rs 10 crore. An inherited property takes the previous owner's cost and holding period.

Last reviewed: 22 May 2026