Yes, you do need to declare this as income, but where depends on a couple of factors. Why is it was below Fair Rental Value? Were you renting to a friend or relative? Is that the most you could get for rent? Did you have a profit motive?
It is probably a Not-For-Profit Rental. If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. You do not therefore, need to depreciate.
Not Rented for Profit
Where to report. Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. If you are filing Form 1040 and you itemize your deductions, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), and real estate taxes on the appropriate lines of Schedule A (Form 1040). You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.
Presumption of profit. If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit.
More information. For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Pub. 535.