In India, the rental income comes in compliance with the income tax. If you own a property and have rented it to another one then you are required to know the method to minimize the tax load. The rental income from real estate investments would be very much better for your portfolio returns. Thus as a landlord, one should know the tax advantage that will increase your returns.
Total Tax Liability On Rental Income for Owners
According to the person’s Income Tax slab rate, the property rental income is been taxed. For instance when the person has no additional income and earns only rental income less than Rs 2.5 lakh then there will be no tax imposed as the income is less than the taxable limit. What will happen if the rental income rises by 20% in the succeeding FY? Will the income be levied with tax? It might still not get taxed because of some tax advantages available on the rental income. Let’s see the tax advantages that would assist the landlords to diminish their tax liabilities.
Standard Deduction Available on Rental Income for Landlords
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Through the assistance of the standard deduction, the landlord would diminish their taxable income. One would apply for a 30% standard deviation on net asset value (gross rent obtain ‘less; property taxes furnished via landlord) to reach net income via house and property. For instance, the rental income of the person is Rs 3.2 lakh while the municipal taxes furnished by him is Rs 20,000. The net asset value will be Rs 3 lakh (Rs 320,000 ‘less’ Rs 20,000), and the 30% standard deduction on NAV arrived at Rs 90,000. thus, net income from house and property will be Rs 300,000 ‘less’ Rs 90,000, i.e., Rs 210,000, below taxable income.
NRIs would indeed avail of the standard deduction on the income via house and property.
Tax Advantages with Respect to Home Loan
When you draw a residential property on the home loan and give it on rent, you will avail of the tax deduction with respect to the interest furnished on the home loan. Beneath Section 24(b) of the Income Tax Act, a landlord would avail of the tax deduction of Rs 2 lakh with respect to the furnished interest on the home loan. When the home loan borrower is indeed eligible for the tax advantage beneath section 80EEA, then he would avail of the advantage of up to Rs 1.5 lakh, which is more than the deduction advantage available in section 24. Thus when you earn the rental income via property bought on a home loan then you would get the deduction of up to Rs 3.5 lakh with respect to the furnished interest.
Tax Advantage for the Property Co-Owners U/S 24 and 80EEA
When you purchase the property mutually then it would support you to draw down your tax liability on the rental income. The tax benefits of co-ownership are determined by the share of ownership defined in the conveyancing deed, so co-owners can claim the tax benefit in proportion to their share. Thus beneath sections 24 and 80EEA with respect to the max subjected deduction threshold, every co-owner of the property would avail of the tax advantage. The whole deduction availed via co-owners must not be more than the interest earned on the home loan in the fiscal year.
If you plan to claim the tax benefits as a landlord, you should keep documents such as a rent agreement and a property deed on hand as proof when the IT department sends a query about the rental income.
