If you own a flat and let it out, the rent you collect is not tax-free — it is taxed in India under a dedicated head called "Income from House Property". The good news for landlords is that this head is unusually generous: it lets you knock off municipal taxes, a flat 30% standard deduction and your full home-loan interest before anything is added to your taxable income. For an investor eyeing a yield-generating apartment at Godrej Brooklyn Avenue in Kukatpally, understanding this computation is the difference between guessing your post-tax return and actually planning for it. This guide walks through the full chain step by step, with a worked example and a computation table. The rules below are stated as of 2026; always verify the current limits on the income tax portal before you file.

Rent Is Taxed Under "Income from House Property"

Indian tax law slots income into five heads, and rent from a residential or commercial building you own falls under "Income from House Property". You do not pay tax on the raw rent figure. Instead, the law builds up a taxable number through a defined sequence of additions and deductions. Getting each rung of that ladder right is what keeps your tax bill honest and your return defensible. The computation runs from Gross Annual Value down to a final taxable figure that is then added to the rest of your income and taxed at your slab rate.

The Computation Chain, Step by Step

The journey from rent received to tax payable has a fixed order. Skipping a step or applying a deduction out of sequence is the most common landlord error, so it helps to follow it literally:

• Gross Annual Value (GAV) — the higher of the actual rent received during the year or the expected rent (the reasonable letting value) the property could fetch. For a genuinely let-out flat at market rent, the actual rent is usually the figure.
• Less municipal taxes paid — any property tax actually paid by the owner during the year is deducted. The key word is paid: tax merely due but unpaid does not qualify, and tax borne by the tenant cannot be claimed.
• Net Annual Value (NAV) — what remains after municipal taxes come off the GAV.
• Less 30% standard deduction — under Section 24(a) you deduct a flat 30% of NAV to cover repairs, maintenance and collection costs. This is a no-questions-asked allowance: you get the full 30% whether you actually spent that much or nothing at all.
• Less home-loan interest — under Section 24(b) the interest on a loan taken to buy, build or repair the property is deductible. For a let-out property there is no upper cap on the interest amount itself.

What is left after these steps is your taxable income from house property. It is then added to your total income and taxed at your applicable slab. There is one important caveat on the interest deduction: while the interest on a let-out property is uncapped, the overall house-property loss you can set off against other heads of income (salary, business, capital gains) in a year is capped at Rs 2 lakh. Any loss beyond that does not vanish — it is carried forward for up to 8 assessment years and can be set off only against future house-property income.

A Word on the New Tax Regime

The regime you choose changes the picture for losses. Under the new tax regime, the Section 24(b) interest deduction on a let-out property is still allowed in the house-property computation, but a resulting loss cannot be set off against your other income heads in that year. So a landlord with a large interest outgo may find the old regime more favourable, since it permits the Rs 2 lakh set-off against salary or business income. This is a regime-level decision worth modelling before you file, as of 2026, and the position is best confirmed on the income tax portal.

Worked Example: A Let-Out 3 BHK

Suppose you let out a 3 BHK at roughly Rs 45,000 a month. The annual rent — your Gross Annual Value — is Rs 5.4 lakh. You paid Rs 5,000 of municipal tax during the year, bringing the Net Annual Value to Rs 5.35 lakh. The 30% standard deduction under Section 24(a) is Rs 1.605 lakh. Assume your home-loan interest for the year is Rs 2 lakh, fully claimed under Section 24(b). The taxable income from house property works out to about Rs 1.745 lakh, which is added to your other income and taxed at your slab. The table below lays out the same calculation line by line.

Step	Description	Amount (Rs)
Gross Annual Value (GAV)	Rs 45,000/month × 12 (higher of actual or expected rent)	5,40,000
Less: Municipal taxes paid	Property tax actually paid by the owner	(5,000)
Net Annual Value (NAV)	GAV minus municipal taxes	5,35,000
Less: Standard deduction (Sec 24a)	Flat 30% of NAV, regardless of actual spend	(1,60,500)
Less: Home-loan interest (Sec 24b)	No cap for a let-out property	(2,00,000)
Taxable income from house property	Added to total income, taxed at slab	1,74,500

Notice how the deductions compress a Rs 5.4 lakh rent down to a taxable Rs 1.745 lakh — roughly a third. That is why a property purchased partly on a home loan can be remarkably tax-efficient as a let-out asset in the early years, when interest forms the bulk of the EMI. Our companion explainer on home-loan tax benefits under 80C and 24(b) covers the deduction mechanics in fuller detail.

TDS on Rent: What the Tenant Must Deduct

If your rent is high, the tax authorities collect a slice at source through the tenant. An individual or HUF tenant who is not under tax audit must deduct TDS at 5% under Section 194-IB once monthly rent crosses Rs 50,000. A company or a tax-audited tenant deducts at 10% under Section 194-I. As the landlord you can claim this deducted amount as credit against your final tax liability, so it is not an extra cost — but you should reconcile it against your Form 26AS each year so nothing slips through. Quote your PAN to the tenant; without it the deduction rate jumps sharply.

The Notional Rent Rule on Extra Houses

There is a quirk worth knowing if you own several homes. You can treat up to two house properties as self-occupied with a nil annual value. From the third house onward, even if it lies vacant and earns you nothing, the law deems it to be let out and charges tax on a notional rent — the rent it could reasonably command. So an investor holding multiple flats cannot keep all of them idle and tax-free; the surplus units attract tax on deemed rent. This is one reason many multi-property owners actively let out the extra units rather than leave them empty, since real rent and notional rent are taxed under the same head anyway.

The Investor Angle at Godrej Brooklyn Avenue

Tax treatment is only half the story — the other half is whether the asset earns enough rent to make the maths work. Godrej Brooklyn Avenue, an under-construction development by Godrej Properties in Kukatpally, west Hyderabad (RERA Telangana P02200010981, 3/4 BHK priced Rs 2.10–4.40 Cr, possession June 2031), sits in a locality with genuinely strong rental demand. It is close to the JNTU College Metro station on the Red Line, Remedy Hospitals is around 2.9 km away, and the IT corridors of HITEC City and Gachibowli are roughly 10–14 km off — the kind of catchment that keeps tenant interest high and vacancy low. A 3 or 4 BHK here can work as a yield-generating let-out, and any rent you earn is then taxed exactly through the chain described above. To gauge the income side, see our note on rental yield in Kukatpally, and if you eventually sell, our guide to capital gains tax on a property sale covers the exit-side tax. For the broader picture, browse the full investment section.

Frequently Asked Questions about Rental Income Tax