Outlook Money
While renting out the property, it is important to know the applicable income tax laws, reduce tax burden and prevent payment delays.
Rental Income Tax refers to the tax calculated from the money received for leasing or renting a property, including advance payments like security deposits.
Tax is imposed under section 24 of the Income Tax Act. In India, rental income is taxed at a rate of 30 per cent under the income category from house property.
As per the Income Tax Act, 1961, rental income derived from a leased residential house property falls under the category of 'income from house property' which hinges upon the Net Annual Value (NAV).
Once the NAV is ascertained, taxpayers can make the deductions in Interest on Housing Loan (if applicable).
This exemption is applicable for both self-occupied and leased properties.
Apart from the standard deduction and housing loan interest, taxpayers who lease out their properties can avail further tax deductions, for expenses related to repairs and maintenance, insurance premiums, and depreciation.