If you have multiple properties in India and your main income is house rent, you have to pay taxes on it.
When it comes to generating income through property rentals in India, it’s important to be aware of the tax implications and the provisions outlined in the Income Tax Act. As the deadline for filing Income Tax Returns (ITR) for the Financial Year 2022-23 approaches, individuals who earn rental income are seeking ways to minimize their tax liabilities. Whether you rent out residential properties, commercial spaces, or even vacant land, understanding the rules and employing effective strategies can help you optimize tax savings.
What is a House Property Income?
Under the Income Tax Act, rental income falls under the category of House Property Income. This includes not only residential properties but also office spaces, shops, building complexes, and other similar properties. If you earn income from vacant land, it will be categorized as “Income From Other Sources.”
Calculation of Rental Income:
Calculating rental income involves considering various factors. Firstly, deduct the municipal taxes you have paid, followed by the standard deduction you are eligible for. If you have a loan on the property, deduct the interest amount. The resulting figure represents the gross annual value of the property, and a standard deduction of 30% is applicable.
Taxation of Rental Income:
According to the Income Tax Act, the rental income tax is levied on the annual rental value received by the property owner. If the Gross Annual Value (GAV) of a property is less than Rs 2.5 lakh, an individual is exempt from paying taxes on the rental revenue. However, if rental income is the primary source of an individual’s earnings, they may be subject to tax obligations.
Strategies to Save Taxes on Rental Income:
Utilize Home Loan Exemptions: If you have taken a home loan to acquire or construct the rented property, you can claim deductions on the interest paid. Section 24(b) of the Income Tax Act allows for a deduction of up to Rs 2 lakh per annum on the interest component.
Joint Ownership: If multiple owners share the rental property, the tax burden can be divided among them. This can help reduce individual tax liabilities and optimize overall tax savings.
Standard Deduction: Claim the standard deduction of up to 30% on the net rental income after subtracting municipal taxes and interest on loans. This deduction reduces the taxable rental income.
Maintenance and Repair Expenses: Keep track of expenses incurred for the maintenance and repair of the rented property. These expenses can be claimed as deductions against the rental income, thereby reducing the taxable amount.
Source: https://www.news18.com/business/unlock-tax-advantages-with-rental-income-under-income-tax-laws-8305297.html
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