Hyderabad landlords: your vacant second flat is taxed as let-out, your tenant owes TDS, and a concessional rent does not reduce the tax.

Yes. Under section 23(4) of the Income-tax Act, where you own more than one house, the annual value of the house you occupy for your own residence is nil and every other house is deemed to be let out — its annual value is the sum for which it might reasonably be expected to let from year to year, whether or not it earns rent. You still get the 30% standard deduction under s.24(a) and the full interest deduction under s.24(b) on the deemed-let-out flat, but the net loss set-off against other income is capped at ₹2 lakh per year under s.71(3A). The one escape: the proviso to s.23(4), which treats a house you cannot occupy because you work in another city (and live there in rented accommodation) as self-occupied with nil annual value.

Your tenant is required to deduct TDS at 10% under section 194I — rent for land, building, furniture and fittings — because the annual rent (₹36 lakh) far exceeds the ₹2.4 lakh threshold (a 2% rate applies only to rent for plant and machinery). The tenant must deposit the TDS by the 7th of the following month under Rule 30 of the Income-tax Rules (March deductions by 30 April) and report it in Form 26Q quarterly. The credit lands in your Form 26AS and must match the rental income you declare in your ITR under the head House Property. If the tenant fails to deduct, interest under s.201(1A) and penalty under s.271C attach to the tenant — but you remain liable to declare the full rent.

Yes. Under section 194IB, an individual or HUF tenant paying rent above ₹50,000 per month to an individual or HUF landlord must deduct TDS at 5%. The deduction happens once — at the time of crediting the rent for the last month of the financial year or the last month of the tenancy, whichever is earlier — and the tenant must deposit it within 30 days and report it in Form 26Q. If the tenant has no PAN, the rate rises to 20% under s.206AA. The 5% credit appears in your 26AS; declare the full ₹7.2 lakh as rental income even if the tenant never deducted — you cannot claim the credit, but you also cannot under-declare the rent.

For a let-out or deemed-let-out property, the interest deduction under s.24(b) is uncapped — the ₹2 lakh ceiling applies only to a self-occupied house. So your full home loan interest reduces the annual value. The limit you will actually hit is at set-off: if the property produces a loss after the 30% standard deduction and the full interest, s.71(3A) caps the set-off against your other income at ₹2 lakh per year, and the excess carries forward up to 8 years against future house property income only. One regime note: if you opt for the new tax regime, s.115BAC(1A) disallows the set-off of house property loss against other heads entirely — interest on a loss-making let-out property effectively goes unrelieved that year.

The reasonable letting value. Under s.23(1)(a), the annual value of a let-out property is the sum for which it might reasonably be expected to let from year to year — and where the actual rent received is higher, it is the actual rent. A concessional rent to a related party does not lower the annual value: the department can tax the market rent of ₹35,000 per month because the shortfall from market value is not owing to vacancy (the vacancy exception in the proviso to s.23(1), which pegs annual value to actual rent, applies only where the property stood vacant). Rent-to-relative and rent-to-own-company arrangements are exactly where this adjustment is made in scrutiny — document why the rent is below market, or charge market rent.