Introduction

If you earn income through house rent or claim House Rent Allowance (HRA) as part of your salary, accurately reporting this in your Income Tax Return (ITR) is not optional—it’s essential. Whether you’re a salaried employee claiming HRA, a landlord earning rental income, or a co-owner receiving a portion of rent, proper disclosure ensures tax compliance and helps you avoid penalties or scrutiny by the Income Tax Department.

With the Income Tax Department ramping up data reconciliation using Form 26AS and AIS, missing or misreporting rent income or HRA claims can lead to refund delays, demand notices, or even penalties up to ₹10,000 under Section 234F for incorrect filings. In more serious cases, prosecution under Section 277 for willful misreporting can apply.

This blog is your complete 2025 guide on how to report house rent income and claim HRA correctly while filing ITR online. Whether you’re:

• A salaried individual living in a rented house

• A landlord receiving rental income from a residential or commercial property

• A joint property owner splitting rental income with co-owners

—you’ll get everything you need here to stay compliant, maximize deductions, and avoid unnecessary tax issues.

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2. Understanding House Rent Income

What Qualifies as House Rent Income Under Indian Tax Law?

As per the Income Tax Act, 1961, any rental income received from letting out a property—residential or commercial—is taxable under the head "Income from House Property". This applies whether you rent out:

• A residential flat

• A commercial shop or office

• A part of your own residence (e.g., subletting a room)

• An independent house or a floor in a building

The rental income must be reported irrespective of whether the tenant is an individual, a company, or a relative. Also, even if you are not receiving rent regularly (e.g., tenant defaulted), you must report the expected rent or notional rent as applicable under Section 23.

Taxable vs. Exempt Rent Income

Most rent received from a property is taxable, but there are a few exceptions. Below is a breakdown:

✅ Taxable Rental Income:

• Monthly rent from residential or commercial property

• Rent received from tenants under a lease agreement

• Advance rent received for future months

• Notional rent (in case of vacant second property)

❌ Exempt or Non-Taxable:

• One self-occupied property (no rent, no tax)

• Rent from agricultural land

• Property rented to charitable institutions (with exemptions under Section 10 in some cases)

Note: Even if your tenant doesn’t deduct TDS (in case rent is below ₹50,000/month), it doesn’t exempt you from disclosing that income in your ITR.

Joint Ownership and Rent Split Implications

If the rented property is jointly owned by more than one person—say a husband and wife or siblings—then the rental income must be split in proportion to their ownership share as mentioned in the property deed.

For example, if a property earns ₹40,000/month rent and is owned 50:50 by two individuals, each must report ₹20,000/month as their gross annual value in their respective ITRs.

Ignoring this can trigger mismatches, especially if:

• One co-owner files ITR showing 100% income

• TDS credit under Form 26AS is only in one PAN

Hence, proper rent-splitting and ownership documentation are vital for joint owners to avoid audit flags.

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BONUS TIP:

If your tenant is paying more than ₹50,000/month as rent, they’re liable to deduct 5% TDS under Section 194-IB and deposit it using Form 26QC. Make sure to reconcile this TDS with Form 26AS before filing your return.

What is HRA (House Rent Allowance)?

House Rent Allowance (HRA) is one of the most commonly claimed tax exemptions by salaried individuals in India. Offered as a part of your salary package, HRA is a financial benefit provided by employers to help employees meet their accommodation expenses when living in a rented house. The best part? You can claim HRA exemption under Section 10(13A) of the Income Tax Act, thereby reducing your taxable income.

Meaning and Components of HRA

HRA is generally listed in your monthly salary slip and Form 16. The amount varies based on:

• Your salary structure

• The city you reside in (metro vs. non-metro)

• Actual rent paid

• Whether you own a house in the city where you work

For tax purposes, the least of the following three amounts is allowed as HRA exemption:

1. Actual HRA received

2. 50% of basic salary if living in a metro city (40% for non-metros)

3. Actual rent paid minus 10% of basic salary

The remaining HRA (if any) becomes taxable income and must be reported while filing your Income Tax Return.

Who is Eligible to Claim HRA?

To claim HRA exemption, the following conditions must be met:

• You must be salaried and receive HRA as part of your salary.

• You must be paying rent for your accommodation.

• You must be staying in a rented house, not your own.

Important: You cannot claim HRA if you live in your own house or your spouse owns the house you’re staying in.

Special Scenarios:

• If you pay rent to your parents, you can still claim HRA (provided rental payments are made and receipts are kept).

• If you share accommodation, you can claim HRA based on your share of rent.

HRA for Salaried vs. Self-Employed Individuals

A major misconception is that only salaried individuals can claim tax benefits on rent. While HRA specifically applies to salaried employees receiving it as part of their pay structure, self-employed individuals and freelancers can also claim deduction under Section 80GG.

Here’s a comparison:

So, even if you're a consultant, gig worker, or freelancer without HRA in your income, you may still be able to claim rent deduction—just under a different section.

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Documents Required to Claim HRA

Claiming HRA isn’t just about ticking a box in your ITR or submitting a rent figure to HR. The Income Tax Department may request proof, especially if your refund is large or the claim is significant. So keeping the right documents for HRA exemption is essential to avoid notice or disallowance.

Here’s a list of documents you must collect and preserve:

✅ Rent Agreement

A signed rent agreement between you and the landlord acts as the primary proof that you’re paying rent. It should include:

• Rent amount

• Address of property

• Names of tenant and landlord

• Start and end date of tenancy

• Security deposit and other terms

Make sure the rent agreement is current and signed by both parties.

✅ PAN of the Landlord (If Rent > ₹1 Lakh/Year)

If the annual rent exceeds ₹1,00,000 (i.e., over ₹8,333/month), you must quote the PAN number of your landlord in your tax filings. If the landlord does not provide a PAN, a declaration explaining the reason should be collected and submitted to your employer.

This is mandatory to avoid rejection of your HRA claim by HR or during tax scrutiny.

✅ Rent Receipts

Rent receipts are crucial proof that you’ve actually paid rent and not just signed an agreement. These can be:

• Physical copies signed by landlord with revenue stamps

• Digital receipts with payment confirmations (UPI, NEFT, etc.)

Receipts should ideally include:

• Rent amount

• Month and year

• Address of rented premises

• Signature of landlord

💡 Tip: Use rent receipt generators available online or ask your landlord to provide monthly receipts for hassle-free documentation.

✅ Employee Declaration to HR/Payroll

Most companies require you to submit HRA declaration through your payroll portal or HR system during investment proof submission (usually in January or February). You must:

• Declare rent paid

• Upload rent agreement and receipts

• Submit PAN of landlord if required

Failure to submit on time means employer won’t process your HRA exemption, and the full amount may become taxable in Form 16. You can still claim it while filing ITR, but only if you have proper documentation.

📌 Internal Link:
👉 Also Read: Common ITR Filing Mistakes to Avoid

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How to Calculate HRA Exemption (With Example)

If you're a salaried individual receiving House Rent Allowance (HRA), you can reduce your taxable income by claiming an HRA exemption under Section 10(13A) of the Income Tax Act. However, to get the full benefit, it’s essential to understand how HRA exemption is calculated.

✅ Components Used for HRA Calculation

The exemption is calculated using the least of the following three amounts:

1. Actual HRA received from the employer.

2. 50% of basic salary (for those living in metro cities like Delhi, Mumbai, Kolkata, or Chennai) or 40% for non-metro cities.

3. Actual rent paid minus 10% of basic salary.

👉 Basic salary includes only the basic pay and DA (if part of retirement benefits), not the gross or total salary.

✅ HRA Calculation Example

Let’s say Mr. Arjun, a salaried employee in Bangalore (non-metro), has the following details:

• Basic salary: ₹40,000/month

• HRA received: ₹18,000/month

• Rent paid: ₹20,000/month

• City: Bangalore (non-metro)

We will calculate annual HRA exemption as follows:

Step 1: Actual HRA received
= ₹18,000 × 12 = ₹2,16,000

Step 2: 40% of basic salary (since Bangalore is non-metro)
= 40% × ₹40,000 × 12 = ₹1,92,000

Step 3: Rent paid – 10% of basic salary
= (₹20,000 – ₹4,000) × 12 = ₹1,92,000

HRA Exemption = Least of the above = ₹1,92,000

Taxable HRA = HRA received – Exemption = ₹2,16,000 – ₹1,92,000 = ₹24,000

So, only ₹24,000 will be added to Mr. Arjun’s taxable income under the HRA head.

✅ Impact of Metro vs. Non-Metro Cities on HRA Calculation

The exemption limit changes based on your city of residence:

• Metro cities (Delhi, Mumbai, Chennai, Kolkata): 50% of basic salary is considered

• Non-metro cities: Only 40% is allowed

This difference of 10% can significantly impact your HRA claim amount, especially for high-salary earners. So, always double-check your city classification before calculating your HRA exemption.

💡 Pro Tip: Always maintain rent receipts, rent agreement, and PAN of landlord (if rent exceeds ₹1 lakh/year) to avoid notices from the Income Tax Department.

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How to Report House Rent Income in ITR

Whether you’re a landlord earning rental income or a salaried employee claiming House Rent Allowance (HRA), correctly reporting house rent in your Income Tax Return (ITR) is critical for tax compliance and refund processing.

Let’s look at both sides: reporting rental income and HRA claim in ITR forms.

✅ ITR Form Selection Based on Rental Income

Depending on the nature and amount of your rental income, you need to choose the correct ITR form:

🔍 Tip: If you receive rent from more than one house, or have loss from house property (due to interest on home loan), ITR-2 or ITR-3 is required.

✅ Where to Enter Rent Received in ITR-1/2

If you’re a landlord or receive rental income from a residential or commercial property, report it under:

• Schedule HP (House Property) section

• Gross Annual Value (GAV): Total rent received or receivable in the year

• Municipal taxes paid (if any)

• Deductions under Section 24 (explained below)

Make sure to adjust vacancy loss, if the house was unoccupied for part of the year.

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✅ Deduction Under Section 24(a) – 30% Standard Deduction

Under Section 24(a) of the Income Tax Act, landlords are allowed a flat 30% deduction from the Net Annual Value (NAV) of the house property. This is given for repairs, maintenance, and wear & tear—even if no actual expenses are incurred.

Formula:
Net Annual Value (NAV) = GAV – Municipal Taxes
Allowable Deduction = 30% of NAV

This deduction helps reduce taxable rental income substantially.

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✅ Deduction Under Section 24(b) – Home Loan Interest

If you’ve taken a home loan for the property you're letting out, you can also claim interest paid on home loan as a deduction under Section 24(b).

Key points:

• Maximum deduction for self-occupied property: ₹2 lakh per year

• No limit for let-out property

• Pre-construction interest can be claimed in 5 equal installments starting from the year of possession

📌 Important: To claim this, keep a copy of your interest certificate from your bank or lender.

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Scenario Example for Landlords:

Mr. Ravi earns ₹20,000/month from his rented flat in Pune. He paid ₹15,000 as municipal tax and ₹1.5 lakh as interest on a home loan.

1. Gross Annual Value = ₹2,40,000

2. Less: Municipal Tax = ₹15,000

3. Net Annual Value = ₹2,25,000

4. Less: Standard Deduction (30%) = ₹67,500

5. Less: Interest on Home Loan = ₹1,50,000

6. Net Taxable Income from House Property = ₹7,500

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By correctly reporting this in your ITR, you avoid scrutiny and ensure faster refunds if due.

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💼 Whether you’re earning rent or claiming HRA, house rent affects your ITR more than you think.

📌 Internal Link:
👉 Also Read: Top 5 Mistakes People Make While Filing ITR and How to Avoid Them

📢 Need help calculating or reporting HRA or rental income?
Let our tax experts handle the hassle for you.

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ITR Filing Tips for Landlords

Accurately Reporting Rental Income in ITR

Rental income earned from residential or commercial properties is taxable under the head “Income from House Property.” As a landlord, you must disclose the gross rent received, even if it’s partially collected. In ITR-1 or ITR-2, depending on your income sources, enter this rent under the “Income from House Property” section. Deduct the standard 30% under Section 24(a) to arrive at the net taxable rental income.

Claiming Deductions on Home Loans

If the rented property is purchased using a housing loan, you’re entitled to claim the interest portion under Section 24(b). The limit is ₹2 lakh per year for self-occupied properties, but there's no upper cap for rented properties. Ensure you have the interest certificate from the bank or lender as proof.

Reconciling Form 26AS for TDS on Rent

In many cases, tenants (especially if they're individuals paying rent above ₹50,000/month or businesses) deduct TDS under Section 194-IB or 194-I. This TDS will reflect in your Form 26AS. Make sure to match the TDS credit shown in Form 26AS with the actual rent received and claim it while filing ITR.

Handling Co-Ownership Scenarios

If the property is co-owned, each owner must declare their share of rent income proportionally. Attach co-ownership proof like a sale deed or agreement and ensure that all owners file ITR accordingly. Joint deductions (like interest or maintenance expenses) should also be split based on ownership percentage.

📌 Tip: Co-owners should ideally maintain individual bank records and rental agreements to avoid future scrutiny.

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Common Mistakes to Avoid in Rent Income & HRA Claims

Mismatched HRA Claim vs. Actual Rent Paid

One of the most common errors is claiming a higher HRA exemption than the actual rent paid. This could result in a mismatch when cross-verified with your employer's Form 16 or AIS (Annual Information Statement), potentially triggering an income tax notice.

Failure to Submit PAN of Landlord

If annual rent exceeds ₹1 lakh, it’s mandatory to mention the landlord’s PAN to claim HRA. Many taxpayers either skip this or provide incorrect details, leading to disallowed deductions during processing.

Non-Reporting of Subletting Income

If you sublet your accommodation while still claiming HRA, the rent you receive becomes taxable. Ignoring this can invite penalties for income concealment. Be transparent and report subletted rent under “Income from Other Sources.”

Commercial Use of Residential Property

If you’ve rented your house to a business or converted it into a shop or office, it must be taxed accordingly. Avoid reporting such income under residential rent to prevent compliance issues.

How SSCOINDIA Helps You Maximize HRA & Report Rent Properly

Filing ITR with house rent income or HRA claims requires careful documentation and compliance. That’s where SSCOINDIA steps in to help:

✅ Personalized HRA & Rent Calculation

Our experts evaluate your salary structure, rent paid, city of residence, and actual documents to accurately calculate HRA exemption using all three methods and pick the lowest taxable value.

✅ Rental Income Mapping & TDS Match

For landlords, we ensure proper TDS mapping from Form 26AS, and calculate eligible deductions under Section 24(a) and 24(b). We handle even complex cases like joint ownership or rent from multiple properties.

✅ Real-Time Compliance & Auto Error Check

Our system flags document mismatches – such as name/PAN mismatches, rent receipt issues, or missing TDS entries – ensuring zero errors and audit-safe filing.

✅ End-to-End ITR Filing Support

We take care of everything – from form selection (ITR-1, ITR-2, ITR-3), document preparation, digital signatures (if applicable), to secure e-verification and refund tracking.

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Conclusion

Properly reporting rent income and claiming HRA isn’t optional anymore – it’s mandatory for tax compliance and to avoid scrutiny.

Whether you're a salaried employee claiming HRA or a landlord earning rental income, filing ITR correctly can help you save taxes and avoid notices from the Income Tax Department.

At SSCOINDIA, our tax experts specialize in HRA claims, rent income declaration, and optimizing your tax liability legally.

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FAQs (SEO + Voice Search Optimized)

Q1. Can I claim HRA and home loan both?
Yes, if you're staying in a rented house and paying EMIs for another property (under construction or in a different city), you can claim HRA and home loan interest (Section 24b) simultaneously.

Q2. Is rental income taxable if I have only one property?
Yes, even if you own only one property and have rented it out, the rental income is taxable under “Income from House Property” after 30% standard deduction.

Q3. Which ITR form should I use for rent income?

• ITR-1 if you have rental income from one house property

• ITR-2 if you have more than one property or foreign income

• ITR-3 if rental income is part of your business income

Q4. Do I need rent receipts to claim HRA?
Yes, rent receipts are required especially if rent exceeds ₹3,000/month or if your employer demands proof for HRA calculation.

Q5. What if my landlord doesn’t give PAN?
If your rent exceeds ₹1 lakh annually, PAN of landlord is mandatory. If unavailable, get a declaration from the landlord, or HRA claim may be denied.