Hyderabad: Your income earned through house rent is taxable. This amount has to be shown in the annual tax returns. The law allows for reduction of tax burden on you with some exceptions. In the long run the income earned through rental is likely to change the personal income tax slabs as well. In this context there are some things that a property owner should know.
Income received on rent or lease of any immovable property has to be shown under 'Income from House Property'. Individuals have to include the house rent income in their total income and pay tax according to the applicable slabs. For example, a person with no other income, just rent is less than Rs. 2.5 lakhs. Then the person will not have any tax burden. Let's say the rent increases by 20 percent next year. Section 80C and other exemptions can also be shown here. Therefore, there is no tax burden when the taxable income is less than Rs. 5 lakhs. Similar rules apply to rental income.
Standard deduction
A house owner can claim some standard deduction from the rental income received by him. This deduction is up to 30 percent of the remaining amount from the gross rent and the property tax is paid.
For example, a person receives a rent of Rs. 3,20,000. If the property tax is paid Rs. 20,000, the remaining income is Rs. 3 lakhs. Over 30 percent of this is Rs. 90,000. Now the net income from house rent is Rs. 2,10,000. This income is taken into account in tax calculation. This standard deduction is applicable for NRIs on interest earned on house and immovable property.
Also Read : How to ward off rising debt burden on your home loan
Home loan interest
When the house bought through home loan is rented out, the interest paid on the loan can be deducted. According to section 24 (b), exemption is available on interest up to Rs. 2 lakhs. When the property is purchased jointly, the co-owners also get tax exemptions. It depends on the ownership share as stated in the purchase document. Interest paid on the basis of share ratio can be claimed under section 24.
