Real estate is one of the oldest and most reliable ways to build wealth. But when someone says, “I earn from my house property,” what does that actually mean? Is it just about collecting rent every month
generating income from house property means you’re leveraging ownership of residential or commercial buildings (and the land they’re on) to earn money. This doesn’t always mean renting out an apartment. It can be a mix of traditional leasing, mookaa and Airbnb-style hosting, or even subletting.
There are two major categories of income when it comes to property : active income and passive income.
Now, here’s the best part—you don’t have to be a millionaire or own a skyscraper to earn from house property. Even a single 1BHK flat can become a powerful asset if you know how to use it.
In the sections below, we’ll break it all down: how income from property works, what laws apply, what strategies you can use, and how people are doing it right now (with real-life stories).
Income from house property
It’s easy to get confused between active and passive income from house property. They’re both legit ways to earn—but the way they work (and how they affect your life and taxes) is very different.
Active Income from Property Explained
Think of active income like a side hustle. You’re earning money, but you’re also putting in serious work.
Let’s say you own a couple of flats in a tourist hotspot like Goa. You decide to rent them out on platforms like mookaa.in. Sounds good, right? But here’s what you’re actually doing:
- Responding to booking inquiries
- Managing check-ins and check-outs
- Cleaning and maintenance between guests
- Dealing with complaints or last-minute cancellations
- Constantly optimizing listings and pricing
That’s not “sit-back-and-relax” kind of money. This is active income—you’re involved day-to-day, making sure your property works like a well-oiled business.
This type of income also includes scenarios like:
- Running a paying guest (PG) setup
- Renting furnished apartments with short-term contracts
- Managing multiple tenants in one property (like student housing)
Yes, the money can be higher. But the time, stress, and risk are also higher.
Illustration Example:
Rohit owns a duplex in Bangalore. He converted it into two units and started renting one floor on a monthly basis and the other as a daily in mookaa . Between coordinating cleaners, handling guests, and fixing the occasional leaky pipe, Rohit is on his phone at least 3–4 hours a day. His income? ₹75,000/month, but he earns it the hard way.
Passive Income from Property Demystified
On the flip side, passive income is more like earning in your sleep. You do the work once—buy or inherit the property—and let it generate cash without much involvement.
For example:
- You rent your house to a long-term tenant under a 2-year lease.
- You get rent automatically credited every month.
- You don’t deal with tenants unless something major breaks.
This is the dream for most real estate investors. Once it’s set up, it runs on autopilot.
Even commercial properties leased to companies (like banks or offices) fall under this if managed through property consultants or brokers.
Illustration Example:
Meera inherited a 3BHK in Pune and leased it out to an MNC executive family. She has a property manager who takes care of maintenance. She gets ₹40,000/month with zero effort. That’s passive income at its best.
Legal Framework and Tax Treatment in India
When it comes to earning from house property, taxes are unavoidable—but not necessarily painful. India’s Income Tax Act has clearly defined rules on how such income is taxed.
What the Income Tax Act Says (Section 22 to 27)
Income from house property is governed mainly under Sections 22 to 27 of the Income Tax Act, 1961. Here’s the breakdown:
- Section 22: Tax applies if you own property and it’s not used for business.
- Section 23: Talks about the “Annual Value” (expected rent if not actually rented).
- Section 24: Allows deductions like standard 30% of the net annual value + interest on home loan (up to ₹2 lakh for self-occupied property).
- Section 25 to 27: Cover conditions for repairs, co-ownership, and deemed ownership.
Important Note:
Even if a house is vacant but could be rented, it may still be taxed on its potential income. This is especially true if you own more than two houses. Only two can be marked as self-occupied. The rest are “deemed let-out.”
So, whether you’re earning actively or passively, the government considers house property income as taxable, and it’s your job to report it honestly.
Types of Property-Based Income Streams
Not all house property income is the same. Let’s look at a few different ways people are generating money from their properties in India today.
Rent from Residential Property
This is the most common method. You rent your flat or home to a family or a group of individuals. This can be:
- Monthly lease basis (long-term)
- Fully furnished or unfurnished
- With or without a maintenance contract
Rental income is stable and works well in metro cities like Mumbai, Delhi, Chennai, etc. A well-located 2BHK can bring in ₹20,000–₹60,000/month depending on the city and locality.
Earnings from Commercial Leases
Have a small shop or office space? Commercial leases can offer higher returns than residential ones.
- Long-term contracts (3–5 years)
- Higher security deposits
- Rent increases every year
- Tenants are businesses (low default risk)
This type of property income usually falls into the passive category unless you’re leasing multiple shops and managing them actively.
Profits from Short-Term Rentals & Homestays
Short-term rentals (mookaa, OYO, etc.) are popular in tourist zones and business hubs.
- Higher income potential per day
- Needs regular management (cleaning, guest handling)
- You’ll deal with apps, payments, reviews, and guests
This is typically active income, and best suited for people who enjoy hospitality.
Income From house Property Income Active and Passive
Story of Active Management – The Hands-On Landlord
Meet Raj, a tech professional in Bengaluru who decided to invest in real estate to diversify his income. He purchased a 2BHK apartment near a tech park, aiming to rent it out to working professionals. Raj chose to manage the property himself, handling tenant inquiries, maintenance issues, and rent collection.
Every month, Raj spends time:
- Advertising the property on rental platforms.
- Screening potential tenants.
- Coordinating repairs and maintenance.
- Ensuring timely rent collection.
While Raj earns a decent rental income, his involvement is significant. This scenario exemplifies active income, where the property owner is directly involved in the day-to-day management of the property.
Story of Passive Income – Earning While You Sleep
Now, consider Priya, who inherited a commercial property in Chennai. She leased it to a retail chain on a long-term contract. The lease agreement includes clauses where the tenant handles maintenance, and rent is automatically credited to Priya’s account.
Priya doesn’t engage in daily management or tenant interactions. Her involvement is minimal, yet she enjoys a steady income stream. This is a classic case of passive income, where the property generates income with little to no active involvement from the owner.
Conclusion
Generating income from house property can be a rewarding endeavor, offering both active and passive income opportunities. The choice between active and passive income depends on your personal preferences, time availability, and investment goals.
Active income requires hands-on management but can offer higher returns and more control over the property. It’s suitable for those who prefer to be involved in the operational aspects of property management.
Passive income, on the other hand, provides a more hands-off approach, ideal for investors seeking steady income without daily involvement. Options like long-term leases, REITs, and property management services can facilitate passive income generation.
Understanding the legal and tax implications, as outlined in Sections 22 to 27 of the Income Tax Act, is crucial. Proper planning and compliance can optimize your returns and ensure a smooth investment experience.
FAQs
Q1: What are the tax benefits available for income from house property in India?
A: Under Section 24 of the Income Tax Act, you can claim a standard deduction of 30% on the net annual value of the property. Additionally, if you’ve taken a loan for the property, you can claim deductions on the interest paid, up to ₹2 lakh per annum for self-occupied properties.
Q2: Can I claim tax deductions for a property that’s not rented out?
A: For self-occupied properties, you can still claim deductions on the interest paid on home loans, up to ₹2 lakh per annum. However, the standard 30% deduction is not applicable as there’s no rental income.
Q3: How is income from REITs taxed in India?
A: Dividends received from REITs are tax-exempt in the hands of investors. However, interest income and capital gains from REITs are taxable as per the investor’s applicable tax slab.
Q4: What is ‘deemed to be let out’ property?
A: If you own more than two properties and keep them vacant, the Income Tax Act considers the additional properties as ‘deemed to be let out.’ You’ll need to calculate notional rent for these properties and pay tax accordingly.
Q5: How can I transition from active to passive income in real estate?
A: To shift from active to passive income, consider hiring property management services, opting for long-term leases, or investing in REITs. These options reduce your involvement while ensuring a steady income stream.
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vijaykumar
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