Renting a house, flat, or commercial space generates income that you could legally save a good sum of money from rental property tax deductions. Most Indian landlords either overlook claiming these benefits or are unaware of them when submitting income tax returns. Knowing these deductions will lower your tax load and raise your real income.
Deductions for Rental Property Taxes:
As a landlord, rental property tax deductions are particular expenses you can write off from your rental income before figuring taxes. Some deductions made possible by the Income Tax Act help lower your taxable income, increasing the profitability of your rental property.
Rental Income Taxation in India:
Taxed under the head “Income from House Property,” rental income is taxed based on the following considerations to determine the ultimate taxable amount:
- Gross yearly value—that is, total rent received
- Convention deduction
- Home loan interest, should any exist
- Taxes paid at the municipal level
Applying these deductions leaves the remaining amount added to your total income and taxed according to your slab.
Principal Deductions from Rental Properties:
You may be eligible for the following rental property tax deductions:
- Standard Deduction: thirty percent Even if you didn’t spend any, the government lets you deduct a flat 30% from your annual rental income for upkeep, repairs, and other property-related expenses.
- Interest in Home Loans Should you have borrowed money to purchase, build, or remodel the rental property, you can deduct interest paid on the loan. On a leased-out property, interest deduction has no upper limit.
- Municipal Charges If you paid property taxes or municipal taxes to the local authorities during the year—that is, if you paid them rather than merely billed—you can write them off.
- Interest on Capital Borrowed from Others Apart from a house loan, should you have taken another kind of loan for repairs or renovations, the interest paid can be deducted from your taxes.
- Vacancy Loss Should your property be empty for a few months and you fail to collect rent, the Income Tax Act lets you count just the actual rent you do get.
- Interest in Pre-Construction Should the property be under construction and you paid interest during that period, you can claim five equal portions over five years beginning with the year of possession.
Key Remarks to Recall:
- Only when the property is let out or intended to be let out can you claim deductions.
- Save all records: rent agreements, tax receipts, loan statements.
- Only one property can be said to be self-occupied; others are rented (even if empty).
Typical Mistakes to Avoid:
- Not claiming the full thirty percent standard deduction
- Avoiding municipal taxes paid
- Ignoring pre-construction interest
- Incorrect income head used for return filing
- Ignoring opportunities to claim top-up loan interest
Final Thought:
Your annual savings could be quite significant if you know your rental property tax deductions. If you rent a house, fully use the legal deductions allowed. If necessary, consult a tax professional, keep your documentation ready, and make your rental income work smarter for you rather than merely harder.
