Budget 2026: Simplified tax calculation for rental income on experts' wishlist; here's why

Many homeowners find the calculation of tax liability on rental income to be very complex. Ahead of Budget 2026, experts at the Bombay Chambers of Commerce and Industry (BCCI) have suggested introducing a simplified taxation regime for rental income taxation.

In its pre-budget memorandum, BCCI has also suggested some other steps that can be taken and also the reason why rental income taxation should be eased.

Let's look at the BCCI's suggestions for Budget 2026:

BCCI has suggested changing the entire scheme of house property taxation.

• The taxation of notional fair value should be eliminated

• No deduction should be allowed for vacant properties.

• The interest deduction for two self-occupied house properties may be granted as Chapter VIA deduction from Gross Total Income.

Further, "Taxpayers should be taxed on actual rent income in case of let out properties against which standard deduction of 30% and full deduction for municipal/local taxes and interest expenditure should be allowed."

The above will "simplify house property taxation, reduce litigation and eliminate the inequity caused due to restriction of house property loss set off," BCCI said.

Alternatively, the government may adopt the following measures, according to BCCI.

• No restriction in setting off the house property losses.

• Any carried forward house property loss should be allowed to be set off against any other head of income in future years, or,

• The limit for setoff of loss on account of interest should be increased to ₹500,000

Why are these changes required?

"There is a need to stimulate the rental market in India. According to the World Bank, we are one of the few countries in the world where participation of rental markets has declined sharply since the 1970s. This trend is contrary to other countries where economic growth has been associated with a significant increase in rental market activity," BCCI said.

"By the year 2030, it is estimated that 40% of the population or 600 million people will be living in cities and towns. Higher urbanisation would require a vibrant rental market which needs to be encouraged so that cities are able to absorb and house the migrating population," it added.