Got Rental Income? Here’s How To Save Tax Legally While Filing Your ITR 2025

The income tax return (ITR) filing season for Financial Year 2024-25 (Assessment Year 2025-26) is officially underway. For the lakhs of Indian taxpayers who earn rental income, this is also the time to maximise tax savings by correctly claiming applicable exemptions and deductions. The good news? The last date to file ITR has now been extended from July 31 to September 15, 2025.

While many property owners believe that claiming home loan interest is the only way to reduce tax liability on rental income, the Income Tax Act, 1961 offers a variety of deductions under the head "Income from House Property". Here’s a complete breakdown of all the major tax-saving avenues available for rental income.

1. Understand How Rental Income Is Taxed
Rental income earned from a property is taxable under the head “Income from House Property.” Even if you own multiple properties and rent them out, you must declare the income and pay tax after allowed deductions.

The key to reducing your tax outgo lies in deducting eligible expenses and statutory allowances, such as municipal taxes and the standard deduction under Section 24(a), from the Gross Annual Value (GAV) of the property.

2. Deduction for Municipal Taxes Paid
Under the Income Tax Act, municipal taxes paid by the property owner during the financial year can be claimed as a deduction from the gross rental income.
However, it is crucial to remember:
Only taxes that are actually paid during the year are deductible.
Taxes that are due but not paid, or paid by the tenant, are not allowed as deductions.

3. Standard Deduction Under Section 24(a)
As per Section 24(a) of the Income Tax Act, landlords can claim a standard deduction of 30% of the Net Annual Value (NAV) of the property. This is allowed irrespective of the actual expenses incurred on repairs or maintenance.
For example:
If your annual rental income is Rs 1,44,000, then:
30% of Rs 1,44,000 = Rs 43,200 (Standard Deduction)
Net income = Rs 1,44,000 – Rs 43,200 = Rs 1,00,800

This is the income on which further deductions, such as home loan interest, can be applied.

4. Home Loan Interest Deduction Under Section 24(b)
Under Section 24(b), individuals can claim a deduction on interest paid on home loans taken for the purchase, construction, repair, renewal, or reconstruction of the house property.
Deduction Limits:
For self-occupied or vacant properties: up to Rs 2 lakh annually.
For rented-out properties: entire interest amount is allowed as deduction without any upper limit.

Important caveats:
If the loan is taken for repairs or renovation, or if the construction is not completed within 5 years, the deduction limit falls to Rs 30,000.

Continuing with the previous example, if your annual interest payment on a home loan is ₹45,000:
Net taxable rental income = Rs 1,00,800 – Rs 45,000 = Rs 55,800

Thus, effective use of Section 24 can reduce your taxable income by a significant margin.

5. Example Calculation for Clarity
Let’s say you’ve let out your property at a monthly rent of ₹12,000, resulting in:
Gross Annual Rent: Rs 1,44,000

Less 30% Standard Deduction (Section 24a): Rs 43,200
(Net after standard deduction = Rs 1,00,800)

Less Home Loan Interest (Section 24b): Rs 45,000
(Final taxable rental income = Rs 55,800)

This effectively means you are taxed on less than 40% of your total rental income.

Deadline Extended: Don’t Miss It
In a relief for taxpayers, the last date for filing ITR for FY2024-25 has been extended to September 15, 2025, from the earlier deadline of July 31. This extension provides more time for taxpayers to collate documents, verify interest certificates from banks, and ensure accurate declarations of their rental and other incomes.

File Smart, Save More
If you're earning rental income, don't miss out on these valuable deductions under Section 24. Whether it’s municipal taxes, the flat 30% standard deduction, or the full interest on your home loan, each provision helps you cut down on your tax outgo.

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Remember: Always keep proper records—tax receipts, home loan interest certificates, and rent agreements—to back your claims in case of scrutiny.
With the ITR deadline extended, now is the best time to ensure you're leveraging every deduction available and filing your returns smartly.