Rental yield: what a flat really earns after costs and tax

The number on the listing is the gross yield

A broker who says a flat "gives 3%" means a year's rent divided by its price. That is the gross yield, and it is the only figure that does not depend on anything the owner pays. What the owner keeps is smaller, because rent comes in for eleven months out of twelve in a good year, the society bills every month, the city bills every year, and the taxman takes a share of what is left.

The rental yield calculator works out both figures. This post walks through each line with one example, so you can see where the money goes.

The example

A two-bedroom flat in a metro, worth ₹1.2 crore today and let at ₹30,000 a month. The buyer paid the same ₹1.2 crore, plus stamp duty and registration of about 7% (₹8.4 lakh; the rate depends on the state) and 1% brokerage (₹1.2 lakh). All in, the flat cost ₹1.296 crore.

The calculator uses the two prices on purpose. Gross yield is measured on today's market value, because that is the money you could release by selling. Net yield is measured on the all-in cost, because that is what you actually put in.

From gross to net, line by line

The costs are assumptions and will differ by city and building, but none of them is unusual. One month of vacancy is 8.3% of the year. A new tenant every two years at one month's brokerage is ₹15,000 a year. A repainting, a plumber and a new geyser over a few years add up to the rest.

Then the tax

Rent is taxed as income from house property, and the deduction is not what most owners expect. From the rent actually received (₹3,30,000) you subtract the property tax paid (₹15,000), which leaves ₹3,15,000. A flat 30% standard deduction comes off that, leaving ₹2,20,500 taxable. Maintenance and repairs are not deducted on top, because the 30% is meant to cover them.

At the 30% slab, which is 31.2% with the 4% cess, the tax is ₹68,796. That leaves ₹1,48,204 a year, or 1.14% of what the flat cost. Note that the taxable amount, ₹2,20,500, is a little more than the ₹2,17,000 the owner kept before tax. At lower slabs the after-tax yield is higher: 1.32% at 20% (20.8% with cess) and 1.59% at 5% (5.2%). The income tax calculator shows which slab the rent falls into once it is added to your other income.

A flat bought with a loan is different again. The interest is deductible against the rent, but within limits on how much of a resulting loss can be set off against other income. The home loan EMI calculator shows how much of each early payment is interest.

How the yield compares with the price

Another way to read the same numbers: ₹1.2 crore is 33 years of gross rent. That ratio is a cousin of the P/E ratio used for stocks, and it is high. As of 9 October 2026 the Nifty 50 traded at a P/E of 19.27 and the Nifty Realty index, the listed developers, at 34.04.

The flat's income yield is about the same as the stock market's dividend yield, and far below what a PPF account or a listed REIT pays out. That does not make the flat a bad investment. It means the flat is a bet on the price rising, not on the rent. If you want 10% a year in total from this flat, the price has to rise by roughly 8.9% a year to make up the gap left by a 1.14% after-tax yield, and you will still owe capital gains tax on the sale. The property capital gains calculator and the guide to property capital gains after indexation cover that end.

Where this leaves a buyer

• Living in it is a different decision. For an owner-occupier the "rent" is the rent you no longer pay, and the comparison is the one in rent vs buy: the honest math and the rent vs buy calculator.
• As an investment, compare the whole return. Our post on real estate vs mutual funds adds stamp duty, maintenance and selling costs to the price history and sets the result against fund returns.
• For property income without a flat, REITs and InvITs pay out most of their rental income, trade daily and can be bought in small amounts. They carry their own risks: unit prices move with interest rates, and distributions are not fixed.

The costs and rates above are an illustration; stamp duty, property tax and society charges vary widely, and so does vacancy. Index P/Es are as of 9 October 2026 and dividend yields as of 8 October 2026; both will change. None of this is a recommendation to buy or sell property or any security.