Renting out a flat in Bangalore brings in monthly income, and the tax department counts it. Many landlords are unsure how much of the rent is taxable, what they can deduct, and why a tenant sometimes holds back part of the rent. Here is how it works, in plain terms.
Rent from a flat you own is taxed under a category called "Income from House Property". You start with the rent, subtract the municipal (property) tax you paid, then the law lets you subtract a flat 30% without showing any bills. What is left is added to your other income and taxed at your normal slab rate.
How Rental Income Is Calculated
A Worked Example
| Item | Amount |
|---|---|
| Rent: ₹30,000 a month × 12 | ₹3,60,000 |
| Less: municipal tax paid | ₹6,000 |
| Net Annual Value | ₹3,54,000 |
| Less: 30% standard deduction | ₹1,06,200 |
| Income from house property (no loan) | ₹2,47,800 |
| If the loan interest is ₹1,00,000 | ₹1,47,800 |
This is an illustration using round numbers, not tax advice. Your own figures and regime choice will change the result.
TDS: Why Your Tenant May Hold Back Part of the Rent
| Tenant | Rule | Rate |
|---|---|---|
| Individual or HUF (not under tax audit) | Section 194-IB: rent above ₹50,000 a month | 2% (it was 5% before 1 Oct 2024) |
| Company, firm or business tenant | Section 194-I: above an annual limit that was raised in 2025 | 10% on buildings |
| Any tenant, NRI landlord | Section 195: no minimum | Around 31.2% in most cases |
- ● For an ordinary tenant under Section 194-IB, no TAN is needed. The tax is usually deducted once, from the last month's rent or when the tenancy ends, and paid with Form 26QC
- ● The tenant gives you Form 16C as proof, and the amount appears in your Form 26AS so you can claim it as credit
- ● If you don't give your PAN, TDS is deducted at 20%, so always share it with the tenant
- ● Example: rent of ₹60,000 a month is ₹7,20,000 a year, so 2% TDS is ₹14,400
About section numbers: the new Income Tax Act, 2025, effective 1 April 2026, renumbers many sections. This article uses the familiar old numbers (194-IB, 194-I, 195) because that is what tenants and bankers still say. Check the current numbers and forms for your filing year.
What You Must Report
- ● All rental income goes in your tax return under house property, whether or not the tenant deducted TDS
- ● If the flat is jointly owned, each owner is taxed on their own share, in proportion to ownership
- ● Keep your rental agreement, rent receipts or bank statements, municipal tax receipts and loan interest certificate
- ● Under the new tax regime, a rebate can bring tax to zero at lower total incomes, but the limits change, so check the current year's figure
If You Are an NRI Landlord
If you own a Bangalore flat but live abroad, your tenant must deduct tax at a much higher rate from the first rupee of rent, and the process is different from the ordinary one. You can still claim credit for it when you file an Indian return, and you may apply for a lower deduction in some cases. Talk to a chartered accountant. Our guide to buying property from an NRI seller explains how NRI tax treatment differs for property sales.
Common Mistakes
- ● Not reporting rent because the tenant paid in cash or did not deduct TDS
- ● Forgetting to give the tenant a PAN, which triggers a 20% deduction
- ● Trying to deduct repair bills in addition to the 30% standard deduction
- ● Having no written agreement, which makes the rent and the tenancy hard to prove
- ● Ignoring the TDS credit in Form 26AS when filing
A proper agreement helps on tax and in disputes. See our rental agreement guide and our guide on security deposits.
Frequently Asked Questions
Rent is part of your total income. Whether you owe tax depends on your total income after deductions and your tax regime, not on rent alone. You may still need to file a return to report it.
A refundable deposit is generally not treated as rent while it is held for return. It becomes relevant if you keep part of it, for example for unpaid rent. Ask your accountant for your case.
The deduction is applied to the rent income you actually have. Detailed treatment of vacant periods and notional rent can vary, so get specific advice.
The tenant deducts and deposits it with the government. You receive the certificate and claim the credit in your return.
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View Pricing & Get StartedLast verified: October 2026. Tax on rental income, TDS on rent and the deductions mentioned depend on the Income Tax Act, as renumbered by the Income Tax Act, 2025 with effect from 1 April 2026. Rates, thresholds and rebate limits are set by each year's Finance Act, and published guides do not agree on every threshold. Confirm current rules with a chartered accountant or on the official income tax portal before you file or deduct tax. This article is general information, not tax advice, and the worked example is only an illustration.