Building riches in India is best done by owning real estate and collecting rental income. When it comes to claiming rental income on taxes, however, many people are perplexed. This blog will teach you the fundamentals of accurately presenting your rental income when submitting income tax returns.
Rental Income: what is it?
Rental income is what you get when someone pays rent while lodging on your property. Every year you file your income tax return and must declare this income.
For what reason should one claim rental income on taxes?
- To stay out of Income Tax Department penalties and notices
- To profit from the legal allowed deductions
- To remain following Indian tax regulations
Show Rental Income in ITR: How to
Filging your tax return requires you to show your rental income under the “Income from House Property” head.
Procedures to Follow:
- Find the year’s overall rent received.
- Subtract municipal taxes paid (should any exist).
- Deduct thirty percent for maintenance—this is a regular deduction.
- Deduct, if relevant, interest on a home loan.
For instance, let’s say you paid ₹20,000 as municipal tax and received ₹2,00,000 as rent. You are claiming:
- 30% standard deduction = ₹54,000
- Net income is ₹2,00,000 less ₹20,000 less ₹54,000 = ₹1,26,000.
- Deduct it too, if you also paid ₹70,000 interest on loan.
Documents You Require
- Rent Agreement
- Bank accounts displaying rent paid
- Municipal taxes received
- Certificate of home loan interest (should any exist)
Can you claim more than one property?
Exactly. One can declare income from several properties. The rest will be taken into account when claiming rental income on taxes, with one being self-occupied.
Errors to Steer clear of
- Not showing friends’ or relatives’ rent
- Making claims for deductions without evidence
- Skipping declaration of vacant property; deemed rent could apply
Expert Advice
- Legal safety calls for using a rent agreement.
- Get paid rent via bank for documentation.
- Depending on your overall income, file ITR-1 or ITR-2.