Zero Tax on Rental Income of Rs.17 Lakh

Budget 2025 made various changes to the direct taxation. New tax rate slab introduced, basic exemption limit increased, tax rebate limit raised under New Tax Regime.

All these changes done to reduce the tax burden on taxpayers and simplify the tax compliance.

Tax slab revised under new tax regime and a new 25% tax rate introduced. The revision of tax slab help in reduce the tax liability of the taxpayers with other basic deductions like standard deduction and tax rebate.

If we talked out taxation of income from various sources, like Income from salary, Income from house property, Income from profits and gains of a business or profession, Income from capital gains, Income from other sources; all these income have different ways to calculate taxes.

Now if we talk about taxation of rental income, then generally, the amount received from renting out residential properties is classified under ‘income from house property’. The tax on rental income is calculated after deducting municipal taxes, standard deductions, and interest paid towards an ongoing home loan, if any that particular property.

Let’s understand the tax on rental income with an example.

Example: Let’s say Rental Income is Rs.17 Lakh per annum. There is no home loan.

Then, tax rate as per new tax regime –

Tax on Rental Income

Calculation of Tax on this Taxable Income Tax Rs.11,76,000

Income 4L – 8L = 4,00,000*5% = Rs.20,000

Income 8L -11.76L = 4,00,000*10% = Rs.37,600

Total Tax Liability = Rs.57,600

But after taking the Rebate under new tax regime into consideration. The tax liability becomes ‘nil’ or ‘zero’.

Assumption: No Other Income apart from Rental Income.