Declaring Rent From a Bangalore Flat: Deductions, Loan Interest and TDS Explained

Anyone who lets out a flat in Bangalore has to put the rent in the tax return, and the law handles it in its own way. This article takes a resident owner from the monthly rent received to the amount that is finally taxed, using the rules for 2026-27. Those rules are now found in the 2025 Income-tax Act, which kept the older provisions on house property.

In Brief

The rent is reported under the heading of house property income. Start with a year of rent and subtract the municipal tax paid on the home. Take off 30% of what remains, and then the interest on any loan connected with the property. The leftover joins the rest of your earnings and attracts the tax rate for your slab, while a tenant paying more than Rs. 50,000 monthly must withhold some tax at source.

The Taxpayer

Ownership, not receipt of money, makes someone liable. Where several people own the flat, each reports a portion of the rent matching the portion in the sale deed. Subletting income, or income from a property that someone does not own, goes under other income with different rules.

The heading covers buildings together with the plots they occupy. Rent from an open plot is excluded. An owner resident abroad uses the same method, yet the tenant's withholding is considerably steeper, a separate subject.

The Sequence of Steps

The first figure needed is the gross annual value: a year of rent, or the amount the home could reasonably command if that is larger. If the home was empty for some months and rent fell as a result, the rent actually received applies.

Next, deduct the property tax you paid to the municipal body that year, which yields the net annual value. Then subtract 30% of that figure. Finally, subtract interest on money borrowed to purchase, construct, repair or renovate the home, and add the answer to your other income.

Why No Bills Are Needed for the 30%

The allowance is given automatically. It replaces all the running costs of a landlord, so actual expenditure, large or small, makes no difference. An owner who spent nothing receives the whole 30%.

The consequence is that maintenance charges, repairs, repainting, new fittings, a broker's fee, building insurance and a property manager's charges are all treated as met by that allowance. Claiming them again is not permitted. Municipal tax is handled differently: the owner deducts the whole amount in the year it was paid, and dues cleared late count in the year they are cleared.

A Numerical Illustration

Imagine a flat in Whitefield rented at Rs. 30,000 per month, with Rs. 9,000 paid as municipal tax during the year. These numbers are examples only.

• Twelve months of rent amount to Rs. 3,60,000.
• After municipal tax, the net annual value is Rs. 3,51,000.
• The 30% allowance is Rs. 1,05,300, which leaves Rs. 2,45,700.

The owner is thus taxed on Rs. 2,45,700 and not on the full Rs. 3,60,000. Add a loan carrying Rs. 4,00,000 of interest for the year, and this head ends with a negative Rs. 1,54,300. The loss is treated differently under the two regimes.

Interest on Loans and What Happens to Losses

For a rented house, all interest is deductible with no upper limit. The familiar Rs. 2,00,000 ceiling applies to homes the owner lives in. Repayment of the borrowed principal has no role in this arithmetic.

A ceiling arises when a loss is set against other earnings. Under the old regime the set-off against salary or other income stops at Rs. 2,00,000 per year, and the excess is carried ahead for eight years against future house property income alone. In the illustration above, the whole Rs. 1,54,300 loss reduces salary.

The new regime is stricter, because the loss cannot be set off against salary or other earnings and cannot be carried ahead. Interest still reduces the rent from that property. Someone with a heavy loan on a flat that is let should run the numbers under each regime before choosing for the year.

How Homes Are Classified

The law places each home in one of three classes. A self-occupied home carries a nil annual value, and up to two homes can be put in this class. A rented-out home is one let for all or part of the year, taxed through the steps above. A deemed tenanted home is a third or later one that is not rented and has not been picked as self-occupied.

A deemed-rented home is taxed on the rent it would fairly command, though locked and idle, and it earns the 30% and the interest deduction like any other. Whoever owns three or more homes names the two owner-occupied ones every year, which changes the tax payable.

Deduction of Tax by the Tenant

Tax at source applies only once the monthly rent goes beyond Rs. 50,000. A tenant who is an individual or family keeps back 2% of the rent; for a company, a firm or any business tenant the figure is 10%.

The individual tenant does this a single time, in the final month of the financial year or of the tenancy, and needs only the landlord's PAN. At Rs. 70,000 per month, the 2% on a full year's rent of Rs. 8,40,000 is Rs. 16,800. The landlord sees it in the annual statement and takes credit for it while filing.

Withholding merely prepays the tax. A landlord in the top slab pays the difference as advance tax or at filing. Employees claiming house rent allowance with annual rent beyond Rs. 1,00,000 must also hand their employer the landlord's PAN.

Less Obvious Rules

Furniture or appliance hire charged separately is treated as other income and gets no 30% allowance. A deposit that is returned is not income, but money kept for good is. Back rent received late is taxed in the year it arrives, with a 30% deduction first.

Rent that never came in can be excluded from the annual value when the rules' conditions are satisfied. Interest paid ahead of completion is apportioned over five years, starting in the year the home is completed. Co-owners should maintain individual records, report their own portion, apply the 30% to it and claim the interest each one actually paid.

Papers to Keep

Maintain the tenancy agreement, a record of each month's bank credit, municipal tax receipts, the interest certificate from your lender and the TDS certificate from your tenant. The rent reported must match the tenant's TDS return and the annual information statement, since a difference between them is a frequent cause of notices.

All of this is general guidance, so have a chartered accountant check any return that involves a loss, joint owners or a third home. Before tenanting a flat, estimate the net yield once tax and loan costs are met, using the EMI calculator for the loan and the Bangalore pages to compare local prices with likely rents.