Tax on rental income: If you are also a landlord then it is important that you have proper information about the tax on rental income. Rental income gets added to your total income. However, many types of deductions are also available on this.
Tax on rental income: If you have given your house on rent, then the income earned from it comes under the purview of Rental Income. Even if you have invested in real estate and earning income from it, you are liable to tax. In such a situation, it is necessary for the landlord to know in detail about the income from rent and the tax on rented income. Rental income is added to your total income and tax has to be paid according to the tax bracket you fall in.
If the only source of income for an individual is rental income and it is up to Rs 2.5 lakh in a financial year, then it is not necessary to file a return. There are many types of deductions also available on rental income. According to the information available on the website of the Income Tax Department, the income earned from rent in a whole year is called Gross Annual Value. Municipal tax can be deducted from this income.
Income and tax is calculated in five steps
Anant Ladha, founder and tax expert, Invest Aaj for Tomorrow (
Anant Ladha, Founder at Invest Aaj For Kal
) said that the calculation of tax on income from house property can be understood in five steps. For example, if the rent for one month is Rs 30,000, then the rent for one year is Rs 3.6 lakh. This is called Gross Annual Value.
Get the benefit of 30% deduction
Net annual value is arrived at after deducting property tax from the gross annual value. Suppose a tax of 60 thousand was paid. In such a situation, the net annual value comes down to Rs 3 lakh. Property tax is also called municipal tax. Now 30 per cent deduction can be availed under section 24a. Its calculation is done on the basis of net annual value.
Deduction benefit will be available under section 24A
In this case, the amount of deduction under section 24A will be 90 thousand rupees. After deduction, the net annual value comes down to Rs 2.1 lakh. If the rented property is purchased with the help of home loan, then interest repayment is eligible for deduction under section 24B.
Deduction up to 2 lakh will be given on interest repayment
The benefit of deduction is available on the interest part of the EMI paid in the entire financial year. Its upper limit is 2 lakh rupees. In the above case, after deduction of Rs 2 lakh, the income from house property of that individual comes down to Rs 10,000. This will be included in his total income and he will have to pay tax according to the tax bracket he falls in.
