If you are about to enter or already have a house renting business, then there are things you should know about the Income Tax Rules applicable to rental business. As per the Income Tax Rules income generated through renting out your owned properties is taxable. In simple words, if you are getting paid rent you will have to pay the tax under the Income Tax Act 1961. And housing rental income is taxed under Income from House and Property. As tax is paid under Income from Other Sources when the landlord is getting paid for a vacant property. However, there are deductions for which owners can apply.
Income Tax Rules For House Or Property-Related Rental Income
The government taxed rental income with this method: “Gross Annual Value (GAV) of the property after subtracting municipal taxes, home loan interest (if any) and standard deductions”.
Here Are The Important Points To Note If You’re Housing Rental Business
- If the owner’s GAV of the property is lower than the ₹2.5 lakh then he is not liable to pay tax. But in case, the rental income is the primary source of his or her income then the taxes have to be paid.
- “A standard deduction of 30 per cent is applicable on the net annual value of the property. Net annual value means GAV minus municipal taxes.”
- If the property renting business is co-owned then all the parties involved will be liable to pay tax as per their income shares.
- “Deduction can also be claimed for interest paid on a home loan under Section 24 (b) of the Income Tax Act.”
Important Things To Note For The Tenants About Income Tax Rules
- “You can get a deduction of House Rent Allowance (HRA) only if it forms a part of your salary. You can claim HRA only if you are living in rented accommodation. Tenants do not have to pay income tax on rent”, mentioned the first post.
- “For people other than employees, rent deduction of 25 per cent of total income or Rs 5000 per month, whichever is lower, can be claimed under Section 80GG”, further added.