Rental income refers to the money you receive from tenants who are occupying a portion of your house or a room. Whether you own the property or have inherited it, the income generated from renting out space is considered taxable under the Indian tax laws. Therefore, it is important to report this income to the tax authorities and fulfill your tax obligations.
Tax Liability on Rental Income
As a homeowner earning rental income, you fall under the purview of the Income Tax Act of India. According to the Act, rental income is categorized as "income from house property." If the total income from the property exceeds the threshold limit, which is currently set at ₹2,50,000 for individuals under 60 years of age, you are required to file your taxes. However, if your total income falls below this threshold, you may be exempted from filing taxes.
Tax Deductions and Benefits
While the rental income is taxable, it's important to note that you can also claim certain deductions and benefits to reduce your overall tax liability. For example, you can deduct the municipal taxes paid on the property, as well as the standard deduction of 30% on the rental income. Additionally, under Section 24(b) of the Income Tax Act, you may deduct interest paid on a home loan you took out to purchase the property.
Filing Taxes for Rental Income
To fulfill your tax obligations, you need to file your income tax return using the appropriate form, typically the ITR-1 or ITR-2. Make sure to completely and accurately disclose your rental income, including the tenant's name, the rental amount, and the term of the lease. Failure to report rental income or filing incorrect information may result in penalties and legal consequences.
While the specific details may vary based on individual circumstances, understanding the basics of rental income taxation can help you navigate the process smoothly and avoid any potential legal consequences.
Look up more articles here for a smooth first time tax-filing process. All the best!
