ITR filing 2026: Only earning rental income? Check if you still have to file tax return

There may be cases where rental income from one or multiple house properties are only source of earnings for a taxpayer. This is particularly common among retired people, individuals living off inherited property, and those who own residential or commercial real estate that generates regular rent.

However, just because you don't have a regular income from employment, business or capital gains, it doesn't mean you don't have to file an income tax return (ITR), according to experts who spoke to Mint. The obligation to pay taxes on rental income depends on several factors such as the amount received each year, available deductions and the taxpayer's overall tax position.

How to report rental income in ITR?

Provided the assessee is not engaged in the business of letting out residential properties, rental income from residential properties owned by the assessee is chargeable to income tax under the head ‘Income from house property’ in income tax return, according to SR Patnaik, Partner and head of taxation at Cyril Amarchand Mangaldas.

Ritika Nayyar, Partner at Singhania & Co. also noted that taxpayers earning rental income can file ITR-1 (Sahaj) if total income does not exceed ₹50 lakh and they satosfy other eligibility conditions. However, if total income exceeds ₹50 lakh, then ITR-2 must be filed. ITR-2 is also required if there are carried-forward losses from house property of earlier years to be set off.

How is tax on rental income determined?

The tax calculation begins with determining the property's annual value, which generally represents the rent earned. This is then subtracted by municipal or property taxes actually paid by the owner during the financial year to arrive at the net annual value for which no bills or proof are required. Additionally, if the property was purchased by using a loan, the interest paid on that loan is also deductible.

“The taxable income is arrived at by subtracting the municipal taxes (if any) and 30% of the gross rent as per Section 24(a). In case of a housing loan, the interest paid will be considered for deduction. It is only after the income exceeds the exemptions/rebate that the tax would become payable,” said Kamal Chhabra, Founder and CEO of KC GlobEd and GCC School.

Who does not need to pay taxes on rental income?

If the taxpayer has opted for the old tax regime, the basic exemption threshold is ₹2.5 lakh for individuals below 60 years, ₹3 lakh for those between 60 and 80, and ₹5 lakh for those above 80.

However, if the person's sole earnings are coming from rental property and the total income after all deductions does not exceed ₹5 lakh, the rebate available to the assessee wipes out any tax liability entirely, said Patnaik.

“For a self-occupied property financed by a home loan, interest is deductible up to ₹2,00,000 and for a let-out property, the full interest paid is deductible without any cap,” he further noted.

Under the new tax regime, income up to ₹4,00,000 attracts no tax, and progressive rates apply thereafter. The rebate available to the assessee effectively makes income up to ₹12 lakh tax-free. However, under the new regime, interest on home loan is unavailable as a deduction for self-occupied properties while the amount of full interest paid remains available as deduction for a let-out property.