{"id":6516,"date":"2022-09-21T13:28:33","date_gmt":"2022-09-21T13:28:33","guid":{"rendered":"https:\/\/www.homebazaar.com\/knowledge\/?p=6516"},"modified":"2025-01-02T12:52:03","modified_gmt":"2025-01-02T12:52:03","slug":"tax-on-rental-income-applicable","status":"publish","type":"post","link":"https:\/\/www.homebazaar.com\/knowledge\/tax-on-rental-income-applicable\/","title":{"rendered":"How Is Tax on Rental Income Applicable In 2025?"},"content":{"rendered":"<h2><strong>What is the Tax on Rental Income?<\/strong><\/h2>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone wp-image-6519 size-full\" src=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income.jpg\" alt=\"What is the Tax on Rental Income?\" width=\"810\" height=\"391\" srcset=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income.jpg 810w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-300x145.jpg 300w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-768x371.jpg 768w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-750x362.jpg 750w\" sizes=\"(max-width: 810px) 100vw, 810px\" \/><span style=\"font-weight: 400\">According to the current Tax Law in India, whenever a property is rented out or leased to someone, the sum received in exchange for the property is referred to as &#8220;Rental Income.&#8221; The amount paid in advance as a deposit also comes in it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The rental income made on the residential or commercial is taxed under the heading &#8220;Income from House Property.&#8221;\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Also, the garage next to your house, parking space or office is considered a residential property and is taxable if rented out. Any property that resembles a structure qualifies as a &#8220;house property&#8221; and is taxable.<\/span><\/p>\n<h2><strong>How is Rental Income Tax Applicable?<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">Rental Income Tax is applicable on residential property as well as on commercial property.\u00a0<\/span><\/p>\n<p><img decoding=\"async\" class=\"alignnone wp-image-6520 size-full\" src=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/How-is-Rental-Income-Tax-Applicable.jpg\" alt=\"Tax on rental income - Rental Income Tax Applicable\" width=\"810\" height=\"391\" srcset=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/How-is-Rental-Income-Tax-Applicable.jpg 810w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/How-is-Rental-Income-Tax-Applicable-300x145.jpg 300w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/How-is-Rental-Income-Tax-Applicable-768x371.jpg 768w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/How-is-Rental-Income-Tax-Applicable-750x362.jpg 750w\" sizes=\"(max-width: 810px) 100vw, 810px\" \/><span style=\"font-weight: 400\">The Income Tax Act of India categorises an individual&#8217;s income into five sections for tax calculation purposes.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Income from a home investment<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Earnings from a salary<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Income from Business and Professional Profits and Gains<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Income on Capital Gains Income<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Income from unrelated sources<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">After subtracting municipal taxes, the standard tax deduction, and interest charged on any home loans taken out, the rental income tax is calculated. <\/span><\/p>\n<p><span style=\"font-weight: 400\">A taxpayer has authorised a 30 % tax deduction from rental income under Section 24A by the Indian Income Tax Act to pay for costs like renovations and repairs.<\/span><\/p>\n<h2><strong>How to Calculate Tax on Rental Income\u00a0<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">The rental income tax is calculated based on GAV ( Gross Annual Value). GAV is the annual rent received from the tenant of your property.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">For example, if the rent of your apartment is Rs. 15000, the GAV is Rs 15000 <\/span><span style=\"font-weight: 400\">x 12 i.e. Rs. 1,80,000\/-. This amount is considered under the limit for rental income tax. So owner does not need to pay tax on rental income.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Whereas the rent received for an apartment is Rs 25000, and the annual rent is Rs 300000 then this rent amount is taxable according to the tax law of India.<\/span><\/p>\n<p><span style=\"font-weight: 400\">To determine the net annual value, deduct the amount of property taxes paid from the GAV. Property taxes, also known as house taxes, are yearly payments made to municipal authorities.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Subtract 30% of the Net Annual Value (NAV), which is a standard deduction allowed per Section 24A of the Indian Income Tax Law.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">If a rental property&#8217;s owner has taken out a mortgage loan, all of the interest paid throughout the annual year may be subtracted from the rental revenue once standard deductions have been taken into account. Section 24B of the Income Tax Act states that this refund is legal.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The remaining sum amount represents a person&#8217;s taxable rental income, on which income tax must be paid by the applicable tax slab.<\/span><\/p>\n<h2><strong>What is the Rental Income tax rate?<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">The rental income tax rate is decided in the Income Tax Act by the Indian government.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">A taxpayer is allowed a 30% standard tax deduction from rental income per Section 24A of the Indian Income Tax Act to pay for costs like restorations and repairs.<\/span><\/p>\n<h2><strong>What are the Deductions on Rental Income?<\/strong><\/h2>\n<p><img decoding=\"async\" class=\"alignnone wp-image-6521 size-full\" src=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Deductions-on-Rental-Income.jpg\" alt=\"Tax on rental income - Deductions on Rental Income\" width=\"810\" height=\"391\" srcset=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Deductions-on-Rental-Income.jpg 810w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Deductions-on-Rental-Income-300x145.jpg 300w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Deductions-on-Rental-Income-768x371.jpg 768w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Deductions-on-Rental-Income-750x362.jpg 750w\" sizes=\"(max-width: 810px) 100vw, 810px\" \/><span style=\"font-weight: 400\">There are deductions on rental income according to section 24A of Income tax law.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The first is a<\/span><span style=\"font-weight: 400\"> standard 30% deduction <\/span><span style=\"font-weight: 400\">of the taxable value of a property for maintenance and restorations. Municipal taxes are subtracted from this amount before being calculated. <\/span><\/p>\n<p><span style=\"font-weight: 400\">If your actual expense is larger or lower than this amount, you may still deduct 30% of it. If you pay your municipal taxes during the current tax year, you can lower them.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The second is a Reduction for true interest paid on a mortgage i.e. this deduction is allowable for self-occupied, rented, or property that is presumed to be rented properties.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">On an accrual basis, interest on borrowed funds used for construction, acquisition, repair, or renovation is entirely deductible from taxes. If the net income exceeds the net annual value, it may be continued for up to 8 years to offset taxable income or adjusted to other income headings.<\/span><\/p>\n<p><span style=\"font-weight: 400\">A tax incentive of up to Rs 50,000 is offered to first-time homeowners who had only one residence on the date the loan was approved under the recently amended Section 80EE of the Income Tax Act.<\/span><\/p>\n<h2><strong>How Much Rent is Tax-Free in India?<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">If a property&#8217;s Gross Annual Cost of rent is less than Rs 2.5 lakh, an individual will not be required to pay tax on their rental income. However, if a person&#8217;s primary source of income is rent, they may be required to pay taxes.\u00a0<\/span><\/p>\n<h2><strong>Rental Receipt Format For Income Tax<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">For the rental receipt for income tax, you need a few details like the tenant&#8217;s name, landlord&#8217;s name, rent amount to be paid, date of payment, address, and signature of the landlord.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Here is the sample rental receipt format for Income tax.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-6522 size-full\" src=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/rental-receipt-format.jpg\" alt=\"Tax on rental income - Rental Receipt Format For Income Tax\" width=\"810\" height=\"272\" srcset=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/rental-receipt-format.jpg 810w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/rental-receipt-format-300x101.jpg 300w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/rental-receipt-format-768x258.jpg 768w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/rental-receipt-format-750x252.jpg 750w\" sizes=\"(max-width: 810px) 100vw, 810px\" \/><\/p>\n<h2><strong>What is the Tax on Rental Income From a Residential Property?<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">The term &#8220;Income from House Property&#8221; refers to the taxation of rental income from real estate owned by the taxpayer, including apartments, buildings, and land.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">All components of the property in this instance will be regarded as separate units, and the revenue derived from each unit will be taxed separately:<\/span><\/p>\n<p><span style=\"font-weight: 400\">The owner&#8217;s income from the apartment will be taxed as self-occupied property income.<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-6523 size-full\" src=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-From-a-Residential-Property.jpg\" alt=\"Tax on rental income - Rental Income From a Residential Property\" width=\"810\" height=\"391\" srcset=\"https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-From-a-Residential-Property.jpg 810w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-From-a-Residential-Property-300x145.jpg 300w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-From-a-Residential-Property-768x371.jpg 768w, https:\/\/www.homebazaar.com\/knowledge\/wp-content\/uploads\/2022\/09\/Tax-on-Rental-Income-From-a-Residential-Property-750x362.jpg 750w\" sizes=\"(max-width: 810px) 100vw, 810px\" \/><span style=\"font-weight: 400\">Additionally, the owner&#8217;s rental income will be taxable under the Income tax law.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Rental income that is exempt from taxation under the Income from Residential Property section includes:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">The rental income from a property that a tenant receives through subletting is not taxable under the Income from House Property term.<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">The total rent will be taxable under Other Sources of Income or Returns and Profits of Business if the leasing out of the property and the renting out of additional assets are interdependent, such as the rental of an equipped theatre.<\/span><\/li>\n<\/ul>\n<h2><strong>What is the Rental tax on Rental Income from Commercial Property in India?<\/strong><\/h2>\n<p><span style=\"font-weight: 400\">Rental income is counted in the tax liability categories in India and is treated the same as other types of income. The commercial property owner must pay rental income tax if the total received as rental revenue reaches Rs. 2,50,000 per year.<\/span><\/p>\n<p>Also read: <a href=\"https:\/\/www.homebazaar.com\/knowledge\/what-is-rental-yields\/\">What is Rental Yields And Why It Is Important In Real Estate<\/a><\/p>\n<h2><strong>FAQs<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><b>How much is rental income exempt from tax?<\/b><\/p>\n<p><span style=\"font-weight: 400\">The annual rent received under Rs. 250000 is a tax-free amount.<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Is rental income passive income?<\/b><\/p>\n<p><span style=\"font-weight: 400\">If tenants use real estate and rental money (or anticipated rental income) is mostly received for the usage of the property, rental activity is considered to be passive income.<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>How much rent can I show in ITR?<\/b><\/p>\n<p><span style=\"font-weight: 400\">40% for non-metro people and 50% of the minimum income, including the reimbursement, for those who live in major cities. The actual rent paid is less than 10% of the base pay, including the depreciation.<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>How do I avoid paying tax on rental income?<\/b><\/p>\n<p><span style=\"font-weight: 400\">By switching to an offset purchase mortgage, you can make use of mortgage interest. By deducting mortgage interest, a landlord can lower the income tax due on rental income by an amount equal to the sum of all mortgage interest paid within the same fiscal year.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is the Tax on Rental Income? According to the current Tax Law in India, whenever a property is rented out or leased to someone, the sum received in exchange for the property is referred to as &#8220;Rental Income.&#8221; The amount paid in advance as a deposit also comes in it.\u00a0 The rental income made [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":18389,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[551,939,944,943,941,940,942,936,937,548,938],"class_list":["post-6516","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation","tag-calculate-tax-on-rental-income","tag-income-tax-on-rental-income","tag-income-tax-on-rental-income-from-commercial-property-in-india","tag-rental-income-from-commercial-property-under-income-tax","tag-rental-income-tax-calculation","tag-rental-income-tax-rate","tag-rental-receipt-for-income-tax","tag-rental-receipt-format-for-income-tax","tag-tax-deduction-on-rental-income","tag-tax-on-rental-income","tag-tax-on-rental-income-india"],"_links":{"self":[{"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/posts\/6516","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/comments?post=6516"}],"version-history":[{"count":6,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/posts\/6516\/revisions"}],"predecessor-version":[{"id":17762,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/posts\/6516\/revisions\/17762"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/media\/18389"}],"wp:attachment":[{"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/media?parent=6516"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/categories?post=6516"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.homebazaar.com\/knowledge\/wp-json\/wp\/v2\/tags?post=6516"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}