Rental Income Exemption Under New Tax Regime - FY 2025-26
While the old tax system still offered advantages for house borrowers and property owners with large deductions, the new tax system delivers lower taxes but eliminates important deductions. india Herald originally published the article Rental Income Exemption Under the New Tax Regime: What You Need to Know for FY 2025-26.
Rental Income Under the New Tax system: The new tax system eliminates deductions for things like interest on loans for self-occupied homes, stamp duty, and principal payments on home loans, but it also offers reduced tax rates. This regime is a suitable choice for people who make up to ₹17.14 lakh in rental income because they can still take use of exemptions under it.
What is Income from house Property?
The term "income from house property" (IFHP) describes the money received from real estate, including residences, businesses, offices, and even land. All property kinds are subject to the same taxation under the Income Tax Act, which regards residential and commercial properties equally for taxation purposes. Using the property for business purposes is the only exception, in which case it might not be covered by IFHP.
House properties are divided into three groups for taxation purposes:
A let-out property is leased to tenants for the fiscal year. When it comes to taxes, the actual rental revenue is taken into account.
A property that is used for the owner's own domestic usage is known as self-occupied property (SOP). There is no income tax on up to two residences that are considered self-occupied.
Deemed Let-Out Property: Even if a piece of property is vacant, it is still considered to be rented out if it is not one of the two self-occupied properties. Rent is calculated and taxed as a notional amount.
How is income from house property calculated?
Deductions Available Under the New Regime
Net Annual Value (NAV), a standard deduction of 30% on rental income, is available under the new tax regime. This can help you save money on taxes since, after the 30% deduction, just ₹12 lakh of your ₹17.14 lakh in rental revenue will be subject to taxes.
Section 24 allows you to deduct interest paid on a home loan for a rental property, according to Upstox. However, under the current regime, you are not permitted to deduct any loss from your rental property from your other sources of income. Therefore, you cannot deduct that loss from other income if your rental costs exceed your income.
Deductions Under the Old Tax Regime
The advantages of the previous tax system outweigh those of the current one. For house loan principal repayments, including stamp duty and registration fees associated with property transfers, you are eligible to receive up to ₹1.5 lakh under Section 80C.
Additionally, Section 24(b) allows you to claim up to ₹2 lakh in interest paid on a self-occupied property and the entire interest for a rental property. You can deduct up to ₹2 lakh from your taxable income annually if your interest payments result in a loss.
Subject to certain restrictions, first-time homebuyers and those buying affordable housing may be eligible for additional deductions under Sections 80EE and 80EEA.
Tax Benefits for Joint Property Owners
As long as certain requirements are met, both co-owners who are also co-borrowers may be eligible for their individual tax benefits when a home loan is taken out jointly. Couples with two incomes benefited greatly from this since it allowed them to claim deductions for principal and interest payments on their home loans, which decreased their tax liability.
However, these advantages are no longer accessible under the new rule. Therefore, especially after the fiscal year 2026, couples or joint property owners will need to carefully consider which tax regime suits them best.
Old or New regime?
Even though the new tax system provides fewer deductions, it is still advantageous for people who only make up to ₹17.14 lakh in rental income annually. The previous system might nevertheless offer greater tax savings for people with large deductions, including home loan repayments.
The old regime could only be worthwhile for taxpayers making more than ₹12 lakh if they could claim deductions of between ₹5 lakh and ₹8 lakh, depending on their income level.
Rental Income Under the New Tax system: The new tax system eliminates deductions for things like interest on loans for self-occupied homes, stamp duty, and principal payments on home loans, but it also offers reduced tax rates. This regime is a suitable choice for people who make up to ₹17.14 lakh in rental income because they can still take use of exemptions under it.
What is Income from house Property?
The term "income from house property" (IFHP) describes the money received from real estate, including residences, businesses, offices, and even land. All property kinds are subject to the same taxation under the Income Tax Act, which regards residential and commercial properties equally for taxation purposes. Using the property for business purposes is the only exception, in which case it might not be covered by IFHP.
House properties are divided into three groups for taxation purposes:
A let-out property is leased to tenants for the fiscal year. When it comes to taxes, the actual rental revenue is taken into account.
A property that is used for the owner's own domestic usage is known as self-occupied property (SOP). There is no income tax on up to two residences that are considered self-occupied.
Deemed Let-Out Property: Even if a piece of property is vacant, it is still considered to be rented out if it is not one of the two self-occupied properties. Rent is calculated and taxed as a notional amount.
How is income from house property calculated?
Deductions Available Under the New Regime
Net Annual Value (NAV), a standard deduction of 30% on rental income, is available under the new tax regime. This can help you save money on taxes since, after the 30% deduction, just ₹12 lakh of your ₹17.14 lakh in rental revenue will be subject to taxes.
Section 24 allows you to deduct interest paid on a home loan for a rental property, according to Upstox. However, under the current regime, you are not permitted to deduct any loss from your rental property from your other sources of income. Therefore, you cannot deduct that loss from other income if your rental costs exceed your income.
Deductions Under the Old Tax Regime
The advantages of the previous tax system outweigh those of the current one. For house loan principal repayments, including stamp duty and registration fees associated with property transfers, you are eligible to receive up to ₹1.5 lakh under Section 80C.
Additionally, Section 24(b) allows you to claim up to ₹2 lakh in interest paid on a self-occupied property and the entire interest for a rental property. You can deduct up to ₹2 lakh from your taxable income annually if your interest payments result in a loss.
Subject to certain restrictions, first-time homebuyers and those buying affordable housing may be eligible for additional deductions under Sections 80EE and 80EEA.
Tax Benefits for Joint Property Owners
As long as certain requirements are met, both co-owners who are also co-borrowers may be eligible for their individual tax benefits when a home loan is taken out jointly. Couples with two incomes benefited greatly from this since it allowed them to claim deductions for principal and interest payments on their home loans, which decreased their tax liability.
However, these advantages are no longer accessible under the new rule. Therefore, especially after the fiscal year 2026, couples or joint property owners will need to carefully consider which tax regime suits them best.
Old or New regime?
Even though the new tax system provides fewer deductions, it is still advantageous for people who only make up to ₹17.14 lakh in rental income annually. The previous system might nevertheless offer greater tax savings for people with large deductions, including home loan repayments.
The old regime could only be worthwhile for taxpayers making more than ₹12 lakh if they could claim deductions of between ₹5 lakh and ₹8 lakh, depending on their income level.