Rental Income Under New Tax Regime: The new tax regime offers lower tax rates but removes deductions like principal repayment on home loans, stamp duty, and interest on loans for self-occupied properties. Those earning up to ₹17.14 lakh in rental income can still benefit from exemptions under this regime, making it a good option for them.
What is Income from House Property?
Income from house property (IFHP) refers to money earned from properties like homes, shops, offices, or even land. The Income Tax Act treats both commercial and residential properties the same for tax purposes, meaning all types of properties are taxed under the same category. The only exception is if you’re using the property for business, in which case it may not fall under IFHP.
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For the purpose of taxation, house properties are classified into three categories:
- Let-Out Property: A property that is rented out to tenants during the financial year. The actual rental income is considered for taxation.
- Self-Occupied Property (SOP): A property that is used by the owner for personal residential purposes. Up to two properties can be treated as self-occupied, with no notional income taxed.
- Deemed Let-Out Property: Any additional property (beyond the two self-occupied ones) is treated as if it were let out, even if it is vacant. A notional rent is computed and taxed accordingly.
How is income from house property calculated?
| S.No. | Particulars |
| A | Gross Annual Value* |
| B | Less: Municipal Taxes& |
| C=A-B | Net Annual Value (NAV) |
| D=30* of C | Less: Standard Deduction |
| E | Less: Interest on Loan^ |
| F=C-D-E | Income from House Property |
Note: Any loss arising under the head IFHP can not be set off against any other head of income in the new regime. Municipal Taxes are allowed as a deduction only if paid during the financial year.
- Higher of expected rent or actual rent received.
- Subject to limits mentioned under Section 24(b) for self-occupied properties.
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Deductions Available Under the New Regime
Under the new tax regime, you can get a 30% standard deduction on rental income, known as Net Annual Value (NAV). This means if you earn ₹17.14 lakh in rental income, only ₹12 lakh will be taxed after the 30% deduction, which can help save on taxes.
According to Upstox, you can also deduct interest paid on a home loan for a rental property under Section 24. But the new regime doesn’t allow you to use any loss from your rental property to reduce income from other sources. So, if your rental expenses are higher than the income, you can’t offset that loss against other earnings.
Rent: ₹17.14 Lakh. Tax: ₹0
| Particulars | Amount in ₹ |
| Computation of Income | |
| Net annual value (NAV) | 17,14,000 |
| Less: Deduction u/s 24(a)* | 5,14,000 |
| Less: Interest deduction under section 24(b) | NA |
| Income under the head of house property | 12,00,000 |
| Computation of Tax Liability | |
| Tax as per slab rates | 60,000 |
| Less: Rebate under section 87A | (60,000) |
| Tax Liability | – |
- Note: It is assumed that the taxpayer doesn’t have income under any other head
- This deduction is available in case of let-out and deemed let-out properties (not for self-occupied properties where NAV is Nil)
Deductions Under the Old Tax Regime
The old tax regime offers more benefits than the new one. You can claim up to ₹1.5 lakh under Section 80C for home loan principal repayments, including stamp duty and registration fees related to property transfer.
You can also claim up to ₹2 lakh for interest paid on a self-occupied property under Section 24(b), and the full interest for a let-out property. If your interest payments cause a loss, you can use that loss to reduce your taxable income by up to ₹2 lakh each year.
More deductions are available under Section 80EE and Section 80EEA for first-time homebuyers or those purchasing affordable housing, subject to conditions.
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Tax Benefits for Joint Property Owners
If a home loan is taken jointly, both co-owners who are also co-borrowers can claim their own tax benefits, as long as they meet certain conditions. This was very helpful for couples with two incomes, as they could reduce their tax burden by claiming deductions for home loan interest and principal repayments.
But with the new regime, these benefits are no longer available. So, couples or joint property owners will need to carefully think about which tax regime works better for them, especially after the financial year 2026.
Old or New Regime?
The new tax regime offers fewer deductions, but it is still beneficial for individuals with only rental income of up to ₹17.14 lakh per year. For those who have significant deductions, such as home loan repayments, the old regime may still provide more tax savings.
For taxpayers earning above ₹12 lakh, the old regime may only be worth considering if they can claim between ₹5 lakh and ₹8 lakh in deductions, depending on their income level.
