How to save tax on rental income:2025

Rental income is an important source of income for many individuals in India. However, it is subject to taxation under the Income Tax Consultant in Kanpur Act, 1961. Proper tax planning can help homeowners legally reduce their tax burden.

In this guide, we walk you through how to save tax on rental income in India. But we will find out different ways, or we will follow the tax rules. If you are looking for expert assistance, you can meet with Vineet Dwivedi, Chartered Accountant in Kanpur, India to provide customized tax saving advice.

How to save tax on rental income in India

Understanding Taxation of Rental Income

Rental income is classified under ‘Income from house property’ in India and is subject to Tax Consultant in Kanpur as per the applicable slab rates. To understand how to save tax on rental income in India, the net taxable income is calculated as follows:

Gross Annual Value (GAV) – Deductions = Taxable Rental Income

Before delving into tax saving strategies, let’s understand the major deductions and exemptions available.

Standard deduction under section 24(A)

The Income Tax Consultant in Kanpur Act provides a standard deduction of 30% on the net annual value of the property to cover maintenance and repair expenses, regardless of the actual expenditure.

Deduction on home loan interest (Section 24(B)

If you have taken a home loan to buy or construct a rental property, the interest paid on the loan is eligible for deduction.

• For self-occupied property, the maximum deduction is ₹2 lakh per year.
• The entire interest amount on rented property is deductible (to the extent of total loss of ₹2 lakh under house property head).

Deduction for municipal taxes

Property owners can reduce their taxable rental income by deducting municipal taxes such as property tax paid during the financial year. This deduction is applicable only when the tax is paid by the owner and not by the tenant.

Benefits of Joint Property Ownership

If the rental property is co-owned with family members, the rental income is divided among the co-owners, reducing the overall tax liability. This is another effective way to save tax on rental income in India.

Claiming Depreciation for Tax Benefits

For assets classified under business assets, depreciation can be claimed under Section 32 of the Income Tax Act, which helps reduce taxable income.

Tax Optimization through HUF and Family Trusts

Forming a Hindu Undivided Family (HUF) or a private trust can help distribute rental income among multiple members, thereby reducing tax liability due to lower individual tax slabs. This is also a strategic way to save tax on rental income in India.

Invest rental income in tax-saving instruments

Instead of keeping the rental income idle, reinvest it in tax-saving instruments like:

• National Pension Scheme (NPS) under Section 80CCD(1B)
• Public Provident Fund (PPF)
• Equity-Linked Savings Schemes (ELSS) under Section 80C

Renting out a business unit

Suppose you rent out your property to a business. In that case, you may receive the rental income as business income instead of house property income, which will enable you to claim additional business-related deductions. This is another way to save tax on rental income in India.

Save tax on rental income: Conclusion

On how to save tax on rental income in India, a proper Tax Consultant in Kanpur planning can significantly reduce your tax liability. By taking advantage of deductions under Section 24, offsetting losses, investing in tax-saving tools, and structuring ownership wisely, landlords can optimize their rental income. Consulting CA in Kanpur, India. Vineet Dwivedi can further help in effective tax planning and compliance. Always seek professional guidance before implementing tax-saving strategies.

Always seek professional guidance before implementing tax-saving strategies to ensure compliance with Indian tax laws.