Rental income from property: what to check before you buy

This guide is general information, and not tax, legal or investment advice. Tax figures here reflect our reading of current rules. Confirm them with your CA, because the Income-tax Act 2025 came into force in April 2026.

How do you find the real rent for a flat?

Ask what tenants actually pay today in similar completed units nearby. Asking rents on portals are what landlords hope for, and the signed figure is often different.

• Ask the local property dealers and the society office what recent lettings went for.
• Match the size, floor and furnishing. A furnished rent is not a fair guide to an unfurnished flat.
• Check how long the units took to let, and how many are empty now.
• Ask who the tenants are, such as a family, students or staff of a nearby employer.

How do you work out the actual return?

Work it out on your whole cost, and after your running costs. Use your own verified figures in this sum. We do not quote a typical yield, because it depends on the unit and we would be guessing.

1. Start with the monthly rent you have verified, and multiply by the months you expect it to be let.
2. Subtract yearly maintenance, property tax, insurance, repairs and any letting fee.
3. Divide what is left by the total cost of buying, including tax, registration and fit-out.
4. Run the sum again after tax, and with a few more empty months, to see how it holds up.

Use the total cost, not the starting price. The buying cost calculator gives you that figure. If you are using a loan, set the interest against the rent, too. In the early years the interest alone can be more than the rent.

What costs eat into rental income?

Vacancy is usually the largest, followed by upkeep and tax. These are the ones landlords tend to leave out.

• Empty months between tenants, during which you still pay maintenance.
• Repainting, appliance repairs and fixing wear after a tenant leaves.
• A letting fee to whoever finds the tenant.
• Property tax and, if a loan is running, interest.
• The cost of furnishing, if you furnish to get a better rent.

How is rental income taxed?

Rent is taxed as income from house property, at your own tax rate. You can generally deduct municipal taxes paid and a standard deduction of 30% of the net annual value, along with home loan interest, within the limits of the law.

The tenant may have to deduct tax from the rent, too. An individual tenant paying more than ₹50,000 a month must generally deduct 2% TDS. Businesses that pay rent have their own rules. Different rules apply if the landlord is an NRI: the tenant usually deducts tax at a much higher rate, as our NRI tax basics page explains. Because the law was renumbered in 2026, ask your CA to confirm each of these for the current year.

What paperwork does a Lucknow tenancy need?

It needs a written agreement that spells out the rent, deposit, term, notice and repairs. Make the tenancy formal from the first day, as an informal one is the hardest to end.

The law here is changing. In August 2026, the Allahabad High Court struck down several parts of the Uttar Pradesh Regulation of Urban Premises Tenancy Act 2021, including those on rent revision, rent determination and eviction by the Rent Authority. The rest of the Act stands, and the older 1972 law revives only so far as needed. Have a local lawyer draft your agreement and confirm the current position, including whether there has been an appeal.

Uttar Pradesh has also moved to cut the stamp duty and registration cost of rent agreements. Reports differ on the details, so check the current figure with the sub-registrar or on igrsup.gov.in.

• Verify the tenant’s identity and complete any police verification that applies.
• Take a deposit and record the condition of the flat in photographs, with a list of fittings.
• State who pays maintenance, electricity and repairs.
• Add a clear notice period, lock-in and rent increase clause.

Who should not buy mainly for rent?

Avoid it if the plan works only with the flat always let, or if you would have to sell in a hurry when it is empty. A property is a slow asset, and the rent usually covers only a part of what you put in.

If a project offers fixed rent, read how “assured” rent works before you count on it. For a shop, the tests differ, so see the commercial property guide. And compare ready and under-construction options, since only a finished unit can be let today. Lalit deals in rentals as well as sales, and can help you find actual rents for a building.