Rental Income Tax Saving: Save Big on Your Property Earnings

Owning a rental property in India is a solid way to earn passive income, but the tax on rental income can feel like a punch to the wallet.  

With smart planning and a good grip on Indian tax laws, you can legally cut down your tax burden and keep more of your hard-earned paisa.  

This article breaks down how to save tax on rental income from property in India 2025, offering practical tax-saving tips for landlords in India to make your personal finance game stronger. 

Read also: Tax Saving Options for Salaried Employees in India 

Understand How Rental Income is Taxed in India 

In India, rental income from any property residential or commercial is taxed under the “Income from House Property” category as per the Income Tax Act, 1961.  

The taxable amount is calculated based on the Gross Annual Value (GAV), which is the higher of the actual rent received or the expected market rent.  

From this, you subtract municipal taxes to get the Net Annual Value (NAV). Then, you can claim deductions to lower the taxable amount. 

For example, if your property in Mumbai earns Rs. 30,000 monthly rent, the GAV is Rs. 3,60,000 annually. If you pay Rs. 20,000 in property tax, the NAV becomes Rs. 3,40,000. Understanding this is key to figuring out how to save tax. 

How to Save Tax on Rental Income: Tips and Strategies 

Here are some legit ways to reduce your tax on rental income: 

Deductions Available on Rental Income Under Indian Tax Laws 

1. Standard Deduction (Section 24(a)): You can claim a flat 30% deduction on the NAV for repairs and maintenance, no matter what you actually spend. For the above example, 30% of Rs. 3,40,000 is Rs. 1,02,000-straight off your taxable income. Income Tax India 
2. Home Loan Interest (Section 24(b)): If you’ve taken a home loan for the rental property, the entire interest paid is deductible, with no upper limit (unlike self-occupied properties capped at Rs. 2 lakh). So, if you paid Rs. 1,00,000 in interest, your taxable income drops further. 
3. Municipal Taxes: Property taxes paid to local authorities are deductible from the GAV, as shown earlier. 

Section 24 and HRA Benefits for Rental Income 

If you’re a landlord who also lives in a rented house, you can claim House Rent Allowance (HRA) benefits under Section 10(13A) if your salary includes an HRA component.  

For instance, if you work in Delhi but own a rental property in Pune, you can claim HRA for the rent you pay in Delhi and deductions under Section 24 for your Pune property.  

This double benefit is a game-changer for personal finance. CBDT Circulars 

Can Rental Income Be Taxed Under a Lower Slab? 

Yes, rental income can be taxed at a lower slab if you optimize your deductions and structure your income smartly. For example: 

• Joint Ownership: If the property is co-owned (say, with your spouse), the rental income is split based on ownership share. Each co-owner can claim deductions, reducing individual tax liability. If your spouse is in a lower tax bracket, this saves more tax. 

• HUF Structure: Creating a Hindu Undivided Family (HUF) account can help. The HUF gets its own tax exemption limit, reducing the overall tax on rental income. Consult a CA to set this up legally. Tax Information Network 

Common Mistakes to Avoid While Filing Tax on Rent Income 

Don’t let these rookie mistakes cost you: 

1. Not Reporting All Rental Income: Hiding rental income is a big no-no. The tax department tracks payments via your tenant’s TDS filings or Annual Information Statement (AIS). Non-disclosure can lead to penalties under Section 271(1)(c). 
2. Missing Deductions: Many landlords forget to claim the 30% standard deduction or municipal taxes, leaving money on the table. 
3. Incorrect ITR Form: Use the right ITR form (like ITR-1 or ITR-4 for simple cases). Filing with the wrong form can make your return defective. 

Tax Exemptions on Rental Income 

Some rental income is exempt from tax: 

• If your total income, including rent, is below Rs. 2.5 lakh (old regime) or Rs. 4 lakh (new regime), no tax applies. 

• Income from properties like farmhouses or those owned by charitable organizations is exempt under specific sections like 10(1). 

What You Need to Know 

To maximize savings, keep records like rent agreements, receipts, and loan interest certificates handy.  

File your ITR by July 31, 2025, for FY 2024-25 (AY 2025-26).  

If you miss deductions, file a revised return by December 31, 2025.  

Stay updated on Budget 2025 changes, as they may tweak deductions or slabs. 

Key Takeaways 

• Claim the 30% standard deduction and home loan interest under Section 24. 

• Use HRA if you’re a tenant and landlord simultaneously. 

• Split rental income via joint ownership or HUF for lower tax slabs. 

• Avoid mistakes like under-reporting income or missing deadlines. 

Got tips or questions on rental income tax saving? Drop a comment or share this article with fellow landlords! 

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