Zero Income Tax on Rs 17 Lakh Rental Income: How a Mumbai Flat Owner Paid No Tax
There is no need to pay any income tax if your income is up to Rs 5 lakh in the old tax regime or up to Rs 12 lakh in the new tax regime, due to the enhanced Section 87A tax rebate. For salaried individuals, there is an additional Rs 75,000 standard deduction, effectively making income up to Rs 12.75 lakh not liable for income tax under the new tax regime.
But TaxBuddy in a tweet shared the story of a person who had a flat registered in Mumbai under his wife’s name. The wife earned Rs 17 lakh rental income from the flat yet didn't pay any tax. Sharing this example, TaxBuddy wrote, “If you own a rental property, you can also pay zero tax.”
Rental income is taxed under the head 'Income from House Property.' You get a 30% standard deduction, and no bills or proofs are required. Here are the calculations:
Annual rent: Rs 17,00,000 30% deduction: Rs 5,10,000 Taxable income: Rs 11,90,000
Rental Income Tax Calculation (Rs 17 Lakh Rent)
| Particulars | Amount (Rs) | Notes | |------------------------------|-------------|---------------------------------------| | Annual rental income | 17,00,000 | Income from house property | | Standard deduction (30%) | 5,10,000 | Flat deduction, no bills required | | Taxable income after deduction | 11,90,000 | Used for tax calculation |
Income Tax Under New Tax Regime
| Particulars | Amount (Rs) | Notes | |------------------------------|-------------|---------------------------------------| | Taxable income | 11,90,000 | After 30% deduction | | Basic exemption limit | 3,00,000 | | | Rebate u/s 87A | Up to 60,000| Makes income up to Rs 12 lakh tax-free | | Final tax payable | 0 | Rs 11.9 lakh becomes tax-free |
Income Tax Under Old Tax Regime
| Particulars | Amount (Rs) | Notes | |------------------------------|-------------|---------------------------------------| | Taxable income after deduction | 11,90,000 | | | Income tax | 1,69,500 | As per slab rates | | Health & education cess (4%) | 6,780 | | | Final tax payable | 1,76,280 | 87A Rebate not available above Rs 5 lakh income | | Summary | Tax on Rs 17 lakh rental income | 1,76,280 |
Extra Deductions Under Old Tax Regime (Beyond 30% Standard Deduction) for Zero Income Tax
| Category | Section | Deduction type | Maximum limit (Rs) | Key conditions / notes | |------------------------------|---------|--------------------------|-------------------|------------------------------------------------------| | Home loan principal & property costs | 80C | Principal repayment | 1,50,000 | Within overall 80C limit | | Home purchase expenses | 80C | Stamp duty & registration | 1,50,000 | Allowed only in year of payment; within 80C limit | | Home loan interest (self-occupied) | 24(b) | Interest deduction | 2,00,000 | For self-occupied property | | Home loan interest (let-out property) | 24(b) | Interest deduction | No upper limit | Full interest allowed for let-out property | | Loss set-off benefit | Income tax rules | Set-off of house property loss | 2,00,000 | Loss can reduce other income per year |
Why It Was Bought in the Wife’s Name
If the property owner: - Has no other income - And taxable income after deduction is ~₹11.9L → Final tax liability can become zero.
This is how Rs 17 lakh rent can result in no tax.
Important Conditions
However, this works only if: - Property ownership is genuine - Rent goes to the owner’s account - Funding and documentation are consistent - No significant additional income exists
If you fund the property but show income elsewhere, clubbing provisions can apply in some cases.
Let’s Get into Details How Tax Liability Can Become Zero in Such Cases
Your income tax depends on the source of your income. As far as rental income from a flat or house owned by an individual is concerned, Abhishek Soni, founder and CEO, Tax2Win.com, says it is taxed under the head ‘Income from House Property’ as per the Income-tax Act, 1961.
It does not matter whether the property is residential or commercial. If you earn rent from it, the income is taxable under this head. Even if the property is not rented but is treated as ‘deemed let out’ (for example, if you own more than two houses), tax may still apply.
Why Does a 30% Standard Deduction Apply on Such a Rental Income?
Soni explains a standard deduction of 30% of the Net Annual Value (NAV) is available on rental income. - This deduction is allowed under Section 24(a) of the Income-tax Act, 1961. - It is available in both the old tax regime and the new tax regime. - There is no upper monetary limit. It is simply 30% of the NAV. - You can claim it for let-out or deemed let-out property.
This 30% deduction is given for repairs and maintenance, even if your actual expenses are lower or higher.
Are There More Tax Benefits Available on a Let-Out Property Under Old and New Tax Regimes?
Soni says under the old regime, an individual taxpayer can claim interest on a home loan (up to Rs 2 lakh for self-occupied property; full interest for let-out property). - Under the new regime, interest deduction for self-occupied property is not allowed, but it is allowed for a let-out property.
Two More Important Factors While Calculating Tax Liability on Rental Income from a Property
Soni says when calculating tax on rental income, the following steps are followed: 1. Gross Annual Value (GAV) – This is the total rent received or receivable during the year (or expected rent, whichever is higher as per rules). 2. From GAV, subtract municipal taxes actually paid by the owner. This gives you the Net Annual Value (NAV). 3. From NAV, deduct: - 30% standard deduction - Interest on home loan (if applicable)
The final amount after these deductions is your taxable income from house property.
So, tax is not calculated on the full rent received. It is calculated on the reduced amount after allowed deductions. This reduces the tax burden significantly.
