Budget 2025 has introduced significant changes in the new tax regime, making rental income more tax-efficient than ever. With the increased tax-free limit of ₹12 lakh, higher TDS thresholds, and deductions available under Section 24(b), individuals earning rental income can pay zero tax on annual earnings of up to ₹20 lakh.
By taking advantage of 30% standard deduction and home loan interest deduction (Without any limit for let-out properties), landlords can legally reduce taxable income and maximize rental earnings without additional tax burdens. In this article, we explain how rental income is taxed under Budget 2025, along with examples to show how landlords can earn tax-free rental income under the new tax regime. 🚀
New Tax Regime (Budget 2025) – Latest Slabs
The new tax regime (Section 115BAC) has been modified in Budget 2025. Below are the latest slab rates:
| Slab (Total Income ₹) | New Tax Rate (%) |
|---|---|
| 0 – 4,00,000 | 0% |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
🔹 Maximum rebate available: ₹60,000 (Applicable for income up to ₹12 lakh).
🔹 No rebate under Section 87A on special rate income like capital gains, lottery, betting, etc.
How ₹20 Lakh Rental Income Can Be Tax-Free?
Tax Deductions on Rental Income Under Section 24(b)
1️⃣ Standard Deduction (30%) – Available for all rental income.
2️⃣ Home Loan Interest Deduction (without any limit) – Available for let-out properties, under New Regime
Example 1: Rental Income ₹20 Lakh with Home Loan
| Income Component | Amount (₹) |
|---|---|
| Gross Annual Rent Received | ₹20,00,000 |
| (-) Standard Deduction @ 30% | ₹6,00,000 |
| (-) Home Loan Interest Deduction | ₹2,00,000 |
| Taxable Rental Income | ₹12,00,000 |
| Tax Liability (New Regime) | 0 (Due to ₹12 Lakh Rebate) |
✅ No tax payable because taxable income is below ₹12 lakh!
✅ Note: there is not limit on amount of interest to claim in case of let out property so you can save tax on above 20 Lakh rental income too
Example 2: Rental Income ₹18 Lakh (Without Home Loan)
| Income Component | Amount (₹) |
|---|---|
| Gross Annual Rent Received | ₹18,00,000 |
| (-) Standard Deduction @ 30% | ₹5,40,000 |
| Taxable Rental Income | ₹12,60,000 |
| Tax Liability (New Regime) | ₹3,000 |
🚨 Minimal tax payable because income exceeds ₹12 lakh slightly.
Important Restrictions Under Section 115BAC(2) (New Tax Regime)
Under the new tax regime, certain deductions and set-offs are not allowed, including:
✅ No deduction for loss from house property against other income.
✅ No additional exemptions like HRA, Deductions under Chapter VIA
👉 Example: If your taxable income from salary is ₹10 lakh and rental income has a loss of ₹1 lakh (after deductions), you CANNOT set off this ₹1 lakh loss against salary under the new tax regime.
However, the standard deduction (30%) on rental income and home loan interest (without any limit) are still available.
Other Tax Benefits on Rental Income in Budget 2025
🔹 TDS on Rent Threshold Increased:
✔ Section 194I (TDS on Rent): Limit increased from ₹2,40,000/year to ₹50,000/month.
✔ This brings Section 194I in line with Section 194IB.
🔹 Higher TDS Exemption for Senior Citizens:
✔ Section 194A (TDS on Interest Income for Senior Citizens): Limit increased from ₹50,000 to ₹1,00,000.
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How come 5% tax slab will be applicable in example 2 you will not get rebate under section 87A if your income exceed 12 lakhs so example 2 is wrong
Rmy rentalincome and pensioa mont of rupeees around 11lakhs added comes to 13 kakhs. After deducting 30 percent from rent towards ain tanan ce how can i reduce below 1275000 to come to zero tax zone