How new government tax rules help landlords save big—tax now applies on net rent, includes 30% standard deduction and pre-construction interest exemption. Practical and easy to follow!
Great news is here for landlords across India! The government has recently introduced the New Income Tax Bill 2025—and it brings substantial relief for those who earn rent as income.
What Has Changed for Landlords?
Tax Based on Net Annual Value (NAV)
Earlier, landlords had to pay income tax on the gross rent, even before deducting municipal or property taxes. Now, the tax rule is more realistic: tax is calculated on the net rent, meaning once you deduct municipal taxes, you only pay on what’s left.
For instance, if your annual rent is ₹5 lakh and you pay ₹50,000 as municipal tax, your taxable rent is just ₹4.5 lakh.
30% Standard Deduction on Net Rent
Now comes a major relief: a flat 30% deduction on the net annual value! This covers maintenance, repairs, and other expenses—without needing bills or paperwork. That’s a direct cut on your taxable income.
Pre-Construction Home Loan Interest Exemption
Another handy update: if you’ve taken a home loan for a property that you now rent out, you get tax exemption on the pre-construction interest. Earlier, this was available only for the property used by the landlord personally. Now, it applies to rental properties too. Plus, joint owners can each claim the exemption separately.
Why This Change Is a Real Win for You?
You pay tax only on what you finally earn—not on gross rent that includes municipal charges.
A flat 30% deduction simplifies things and reduces your tax burden, even without invoices.
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Home loan interest relief applies broadly—making renting out more tax-friendly than ever.
Clarity and fairness—these changes bring transparency and simplicity to tax calculations.
Real-Life Example to Illustrate
Let’s say you receive ₹5 lakh in rent annually.
| Description | Amount (₹) |
| Gross Rent | 5,00,000 |
| Less: Municipal Tax | 50,000 |
| Net Annual Value (NAV) | 4,50,000 |
| Less: 30% Standard Deduction | 1,35,000 |
| Taxable Rent | 3,15,000 |
That’s a much kinder number than paying tax on ₹5 lakh straight away.
If you also have pre-construction interest worth ₹1 lakh, that amount gets deducted, too—bringing your taxable income even further down.
FAQs —
Q1: What exactly counts as Net Annual Value?
It’s the rent you earn minus the municipal tax you pay—so tax is only on your real income.
Q2: Is the 30% standard deduction automatic?
Yes! No bills or proof needed—you get a flat, hassle-free 30% cut.
Q3: Does the interest exemption apply to rental property?
Absolutely. Pre-construction interest on rented-out property is now exempt. Joint owners can each claim it separately.
Q4: When did these rules come into effect?
They were introduced in the newly passed Income Tax Bill 2025. So, they apply in the current assessment year.
Q5: How do I benefit immediately?
Just calculate your net rent, claim the 30% deduction, and if you have pre-construction interest, subtract that too. File your taxes with these deductions for big savings.
Final Thoughts
If you’re a landlord, this tax update feels like a breath of fresh air. Now, your rent income is taxed cleverly—not harshly. From net rent assessment to automatic deductions and home loan interest exemptions, it all adds up to real savings for you. This simple, landlord-friendly rule change brings fairness, ease, and clarity—and that’s something to feel good about.
For anyone renting property or thinking of getting into it, these changes make the tax side of things a lot easier to manage.
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