Do I pay tax on a house I let to family?

CA Vijay R Singh, FCA
Chartered Accountant · ICAI M.No. 153926 · FRN 136869W

Short answerIf you genuinely let a house to a family member and charge a reasonable rent, that rent is taxable to you like any other rental income (after the usual deductions). You cannot avoid tax by charging a token rent — the law can apply a deemed market rent if the rent is unrealistically low.

Family rent is still rent

Letting to a relative does not change the tax: the rent you receive is taxable as house-property income, with the municipal-tax, 30% and interest deductions. The family relationship doesn’t make it exempt, but it also doesn’t make it worse — the normal rules apply if the arrangement is genuine.

Don't charge a token rent

The risk is charging an unrealistically low rent to a relative to reduce tax. The department can substitute a deemed market rent where the actual rent is below what the property would reasonably fetch. So charge a fair market rent, document it with an agreement and bank transfers, and the income is accepted. Keep evidence the rent is realistic.

A worked example

Example: you let a flat to your brother at ₹20,000 a month (a fair rate) — ₹2.4 lakh of rent, taxed after deductions. This can pair neatly with him claiming HRA if he pays you, similar to the rent-to-parents arrangement. But charging ₹2,000 for a flat worth ₹20,000 invites a deemed-rent adjustment. Our team can set it up defensibly.

Income Tax

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Talk to CA Vijay R Singh

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This answer is general information for taxpayers, not tax advice. Tax rates, thresholds and forms change with each Finance Act — please confirm the current position for your own facts, or speak to us, before acting.