Understanding Taxation on Real Estate Rental Income

Income earned from real estate, such as buildings or land, is classified as taxable “house property” income. Individuals may use the ITR-1, ITR-2, ITR-3, or ITR-4 tax return forms to record this income.

What Is Income From House Property?

“Income from house property” refers to any revenue earned from a home, including rent and equity transfers. As per the Income Tax Act, ‘house property’ refers to any type of property, including offices, warehouses, buildings, and houses. This revenue is one of the five categories that go into determining your gross total income (or total earnings) for the year. Nonetheless, several deductions may be taken before this income is taxed.

Understanding Income from House Property

Three requirements must be satisfied for income to be classified as “Income from House Property”:

  1. The property needs to include land, a building, or an apartment.
  2. The property should belong to the taxpayer.
  3. Using the property for professional or business reasons is not permitted.

The taxation of house properties varies depending on whether they are inherited, rented out to tenants, or self-occupied. Here is a discussion of the various types of home properties and how they impact taxation.

Let-Out Property: This refers to renting out your home to renters and receiving rental revenue from them.

Self-Occupied Property: A home is considered self-occupied if you reside there yourself. Tax-wise, you can still consider it as self-occupied even if you are unable to live there due to employment or business elsewhere. You may count up to two homes as self-occupied for tax purposes.

Deemed Let-Out Property: You may designate two of your properties as self-occupied if you own more than two for personal use. The remaining properties are regarded as let-out properties.

You will need to choose the appropriate kind of residential property from the list of alternatives on your income tax return. Selecting the appropriate category is essential for correctly reporting your rental revenue and obtaining the appropriate deductions.

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Stuti Talwar

Expressing my thoughts through my words. While curating any post, blog, or article I'm committed to various details like spelling, grammar, and sentence formation. I always conduct deep research and am adaptable to all niches. Open-minded, ambitious, and have an understanding of various content pillars. Grasp and learn things quickly.

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