Investing · Money · The Propah POV

Gross yield or net yield: which number should you actually compare?

Lakshita Sanwal· Founder, Propah Realty, Bengaluru· Last reviewed: 6 September 2026· 13 min read

Neither, on its own. Compare net yield after tax, on your all-in cost. On a realistic Bengaluru apartment, a 3.6% gross yield becomes 1.98% after costs and tax — and under 1.6% if you pay the maintenance. Almost the entire gap is predictable in advance, which is why quoting gross is a choice, not an oversight.

What each number means

Gross yield is annual rent divided by the property price. It is one division, it needs no assumptions, and it is therefore what appears in every brochure and every listing.

Net yield is what actually reaches you after everything that reduces the rent and everything that increases the price, divided by what you actually spent.

The gap between them is not small and it is not random. It is a predictable stack of costs that a seller has every incentive to leave out and you have every incentive to model.

Gross yield answers a question nobody is asking: what would I earn if renting a flat were free?

The denominator problem, before we even get to costs

Start with the division itself, because the first leak is in the bottom half.

Gross yield is quoted on the sticker price. You did not pay the sticker price. On a ₹1.2 crore apartment in Karnataka, statutory cost runs to roughly 7.6% — stamp duty, cess, surcharge and the registration fee that doubled to 2% in August 2025 — plus legal, diligence and any brokerage. Call it ₹1.30 crore all-in.

Same rent, different denominator: 3.60% becomes 3.32% before a single cost comes off the top. You have lost nearly three tenths of a point simply by being honest about what you spent.

The worked example

A 1,200 sq ft two-bedroom apartment in an eastern Bengaluru corridor. Bought at ₹1.2 crore, all-in ₹1.30 crore. Let at ₹36,000 a month — within the range Anarock records for that micro-market. Owner at the 30% tax slab.

Line	Amount	Why
Gross annual rent	₹4,32,000	₹36,000 × 12
Less vacancy	−₹36,000	One month between tenants, annualised
Less re-letting brokerage	−₹18,000	One month’s rent per tenant, tenant changing every two years
Less owner-borne maintenance	−₹15,000	Vacancy-period maintenance and sinking fund
Less municipal property tax	−₹6,000	Indicative — use the BBMP calculator for yours
Less repairs and replacements	−₹15,000	Painting between tenants, plumbing, appliances
Pre-tax net	₹3,42,000	2.63% on all-in cost
Less income tax	−₹85,176	See the calculation below
Net after tax	₹2,56,824	1.98% on all-in cost

3.60%gross yield, as it would be quoted to you

3.32%gross yield on what you actually spent

2.63%net, before tax

1.98%net, after tax — the real number

Then two variations that are entirely within your control at the point of signing:

If you use a property manager at 8% of collected rent — effectively unavoidable if you live abroad — net after tax falls to ₹2,25,144, or 1.73%.
If your rent is quoted “all inclusive” so you bear society maintenance at, say, ₹4.50 per sq ft a month, net after tax falls to ₹2,07,024, or 1.59%.

The maintenance clause that costs you a point

In Bengaluru practice the tenant usually pays monthly society maintenance and the owner pays the corpus or sinking fund. But plenty of tenancies are written with an all-inclusive rent, and the difference on a 1,200 sq ft flat in a mid-range gated community — where maintenance runs roughly ₹3.50–5.50 per square foot a month — is around ₹50,000 a year.

That is 0.4 percentage points of net yield decided by one line in the rental agreement. At a headline yield of 3.6%, it is more than a tenth of your entire return. Premium and luxury towers charge ₹5–8 and ₹7–12 per square foot respectively, so in a high-amenity building this clause matters more, not less — which is the opposite of what most buyers assume.

The tax section, and the thing people get wrong

Rental income is taxed as income from house property. The computation runs:

Start with Gross Annual Value — broadly the rent received.
Deduct municipal taxes actually paid by the owner during the year, giving Net Annual Value.
Deduct the 30% standard deduction under section 24(a) of NAV.
Deduct home loan interest under section 24(b) — with no ceiling on a let-out property, unlike the ₹2 lakh cap on a self-occupied one.
The remainder is taxed at your slab rate, plus cess.

In our example: ₹3,96,000 collected, less ₹6,000 municipal tax, gives NAV of ₹3,90,000. The 30% standard deduction removes ₹1,17,000, leaving ₹2,73,000 taxable. At 30% plus 4% cess, that is ₹85,176.

The 30% is an allowance, not a reimbursement

The standard deduction is a flat 30% of NAV regardless of what you actually spent. It is available whether your repair bill was zero or double.
Which means your maintenance, repairs, management fees and brokerage are not separately deductible. They come out of your pocket and out of the 70% that is already taxed. Most yield spreadsheets we see deduct them twice, or treat them as tax-deductible when they are not.
If your actual costs run below 30% of NAV, the allowance works in your favour. Above it, you get no further relief.
Loan interest is the exception and it is a large one — deductible in full on a let-out property, on top of the 30%. A leveraged rental can therefore show a very different tax position from an unleveraged one.

If you are an NRI, there is one more layer

A tenant paying rent to a non-resident landlord must deduct tax at source on the gross rent — commonly cited at 31.2%, being 30% plus 4% cess — not on your net taxable income.

In our example that is ₹1,34,784 withheld against an actual liability of ₹85,176. The excess is recoverable when you file, but it is out of your hands for the better part of a year, and the yield you experience month to month is far below the yield you eventually earn.

It is also administratively heavy on the tenant, who must obtain a TAN, deposit via challan by the 7th of the following month, file Form 27Q quarterly and issue you Form 16A, with Form 15CA online at each payment and Form 15CB certified by a chartered accountant where annual rent exceeds ₹5 lakh. Individual tenants frequently do not know this, and some walk when they find out.

A lower-deduction certificate under section 197 fixes it, in the same way it does on a sale — and for the same reason, it has to be obtained before the rent starts flowing rather than after.

The number to compare instead

Net yield after tax, on all-in cost. And then, separately, understand that yield is only half the return.

Total return = net yield after tax + realistic appreciation. Both halves need to be honest. If someone shows you 3.6% gross and 12% appreciation, you are being shown two numbers that have each been chosen from the most flattering available series.
Use a conservative appreciation figure. Bengaluru prices rose about 9% over the year to mid-2026 and micro-markets vary widely — Whitefield’s asking index rose about 3.5% in the same window.
Compare like with like. If you are weighing property against another asset, compare after-tax against after-tax, and account for the fact that property is illiquid, indivisible, concentrated in one location and takes months to exit.
Model the leverage separately. With a loan, the relevant number is cash-on-cash return — net cash after EMI and tax, over the equity you actually put in. It can be much better or much worse than the unleveraged yield, and it is the number that determines whether the property funds itself.

We are not financial advisers and this is not a recommendation about where to put your money. It is the arithmetic you need before anyone else’s recommendation is worth listening to.

What we would do

Build the denominator first. All-in cost, including the 7.6% statutory load, before you look at any yield figure.
Assume one month of vacancy a year unless you have a specific reason not to. Sellers assume none.
Settle the maintenance clause deliberately. It is worth roughly 0.4 points and it is decided by a sentence.
Model tax at your actual slab, and remember that your costs are not separately deductible against the 30% allowance.
If you are an NRI, plan the section 197 certificate before letting, and tell prospective tenants what their obligation is early.
Then compare the after-tax number against whatever else you were considering. Our yield calculator runs vacancy, management, maintenance and tax so you can see the gap on your own figures.

What this does not cover

The worked example uses one plausible set of assumptions. Rent, vacancy, maintenance, property tax and your slab rate will all differ — the method matters more than the numbers.
Property tax is indicative only. BBMP computes it by zone, built-up area and usage; use the official calculator for your property.
Maintenance ranges quoted are Bengaluru market guidance by segment and are typically billed on carpet area, which is smaller than the super built-up area you were sold.
Tax treatment assumes a let-out residential property held individually. Joint ownership, commercial property, company ownership and the loss set-off rules on interest are not covered.
Section numbering under the Income Tax Act 2025 is in transition; section 24 references are given as commonly used. Confirm current numbering before citing.
This is general information, not tax or investment advice. Confirm your position with a chartered accountant.

What is the difference between gross yield and net yield?

Gross yield is annual rent divided by the property price — one division, no assumptions, which is why it appears in every brochure. Net yield is what actually reaches you after vacancy, maintenance, property tax, repairs, management and income tax, divided by what you actually spent including stamp duty and registration. On a realistic Bengaluru example the two are 3.6% and 1.98% respectively.

What is a realistic net rental yield in Bengaluru?

Gross yields run roughly 3–4%. After vacancy, maintenance, property tax, repairs and income tax at the 30% slab, a net yield around 2% is realistic for a residential apartment on all-in cost — and closer to 1.6–1.75% if you use a property manager or bear society maintenance yourself. Anyone quoting a net figure much above that is either using a lower tax slab, ignoring vacancy, or calling a gross number net.

Which costs sit between gross and net yield?

Vacancy between tenants, re-letting brokerage, society maintenance where the owner bears it, corpus or sinking fund contributions, municipal property tax, repairs and replacements, property management fees if used, and income tax. On the other side of the division, the purchase costs — stamp duty, cess, surcharge, registration and legal fees, roughly 7.6% in Karnataka — raise the denominator, which reduces yield again before any cost is counted.

Are maintenance and repairs deductible from rental income tax?

Not separately. Section 24(a) gives a flat standard deduction of 30% of Net Annual Value regardless of what you actually spent, and that allowance is intended to cover repairs and upkeep. So maintenance, repairs, management fees and brokerage reduce your cash but do not reduce your tax further. The exception is home loan interest under section 24(b), which is deductible in full on a let-out property with no ceiling, and municipal taxes, which are deducted before the 30% is applied.

How much TDS must a tenant deduct on rent paid to an NRI?

Commonly cited at 31.2% — 30% plus 4% cess — applied to the gross rent rather than to your net taxable income. The tenant must obtain a TAN, deposit by the 7th of the following month, file Form 27Q quarterly and issue Form 16A, with Form 15CA at each payment and Form 15CB certified by a chartered accountant where annual rent exceeds ₹5 lakh. A lower-deduction certificate under section 197 reduces it to something closer to your real liability, and must be obtained before the rent starts.

Should the tenant or the owner pay society maintenance?

In Bengaluru practice the tenant usually pays the monthly maintenance and the owner pays corpus or sinking fund contributions, but all-inclusive rents are common and the agreement governs. It is worth settling deliberately: on a 1,200 sq ft flat in a mid-range gated community at ₹3.50–5.50 per square foot a month, it is around ₹50,000 a year, or roughly 0.4 percentage points of net yield. In premium and luxury towers, where maintenance runs ₹5–12 per square foot, it matters more.

Should I compare rental yield against a fixed deposit?

Only on an after-tax basis, and only while remembering they are not the same kind of asset. Property is illiquid, indivisible, concentrated in one location, carries maintenance and tenant risk, and takes months to exit — but it also carries capital appreciation, which a deposit does not. The right comparison is total return, net yield after tax plus a conservative appreciation assumption, against the after-tax return on the alternative. We are not financial advisers; this is the arithmetic, not a recommendation.

Does a home loan improve or worsen rental yield?

It changes the question. Yield on the full property value is unaffected, but what matters when you borrow is cash-on-cash return — net cash after EMI and tax, divided by the equity you actually put in. Interest on a let-out property is deductible in full with no ceiling under section 24(b), unlike the ₹2 lakh cap on a self-occupied property, so the tax position can be materially better. Whether the cash position is better depends on whether rent covers the EMI, which at current Bengaluru yields it usually does not.

Worked example computed by us and shown line by line so it can be checked; the arithmetic is reproducible from the figures given. Rent range from Anarock’s Bengaluru Q2 2026 micro-market data; Bengaluru maintenance ranges by segment and the 7.6% Karnataka statutory cost from published market guidance checked in September 2026; section 24 deductions and the NRI rent TDS position from published tax guidance, also checked in September 2026. Property tax is indicative — BBMP computes it by zone, area and usage. Tax figures assume a resident individual at the 30% slab holding a let-out residential property; your position will differ. Section numbering under the Income Tax Act 2025 is in transition and references are given as commonly used. This is general information, not tax or investment advice.

Still deciding, or want this applied to your own situation?

Tell us where you are and we will come back to you. The first conversation is free, and we will tell you plainly if we are not the right people for it.

3.6% is a marketing number. 1.98% is your income.

Every rupee of the difference is predictable before you buy. Model it first, then decide whether the appreciation case carries the rest.

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