Income Tax Declaration: Things to keep in mind if you have rented out your house
Every financial year we all are busy in submitting our investment proofs in order to save tax. Especially, the salaried one. Some of them invest haywire in the last minute to save tax. There are many sections under which one can save taxes accordingly by investing in different tax saving methods and showing income from other sources like rental property and rental income. But apart from salary, rental income or income from property is one of the most common sources of income in India which taxpayer want to add on especially the ones who are retired and have rental income as the main source of their livelihood. Many of us are still not aware as how to avail tax benefits by reducing your tax burden on rental income. Let’s understand by reading some of the important points related to planning the tax burden on rental income.
Veracities to reduce your tax from rental income:
Give Attention to higher rental income: One can give attention to higher rental income from more than one property in the same city which they get and declare the value of his or property as high rental value. To pay the income tax one can declare the tax by calculating the estimated rental value on the other properties accordingly.
According to CA Gopal Kedia, Managing Partner, G.K Kedia &Co " Rental income is taxed in Income-tax Act' under the head Income from House Property. 30% of Rental income is deducted as Standard Deduction. For claiming Standard Deduction, the Assessee must be legal owner of Property, otherwise it will be taxed under the head 'Income from Other sources and 30% deduction will not be available".
Can claim municipal taxes and standard deduction: One can get pay timely Municipal or property taxes for their rental income and can avail reduction in the financial year while doing the payment. Remember, for standard deduction after reducing the municipal or property tax paid yearly from the gross rental income, you will get further a deduction of 30% under section 24a. One can use this percentage to reduce the net rental income further to reduce taxes Standard deduction is applied for all types of properties; residential and commercial both. On can use it for maintenance and repairs of his or her property.
"For Claiming interest on housing loan, the Assessee must be legal owner of Property. If loan is taken by husband and wife and loan is sanctioned in the name of husband and repayment is also done by husband, he can claim only 50% of interest as deduction", says Kedia.
NRIs can also claim the standard deduction on their rented properties
Reduce tax burden from taking a loan on a self-occupied house and claim upto 2 lakh rupees per annum as loss from self-occupied property under the income form house property.
Tax reduction from loan on let our property by claiming the interest (no limit to claim). Claim depends on which area is self and which one is deemed out property.
Interest can be claimed on pre-possession to lower the tax burden. It can be claimed for five equal annual installments after you get the possession of the house booked.
Principal amount on the housing loan can be claimed under section 80C (1.5 lakhs) and one can avail tax deduction benefit.
Taking join home loan for a property can also give you tax benefits and decrease the burden of tax. One can take joint home loan to reduce the tax burden with his or her spouse. It will also reduce the rental income tax burden jointly.
NRIs can also avail the same provision of taxes but the only rule is that the rental income received is to be deposited in the NRO account only to simplify the return of rental income.
Before submitting your tax, declaration and proofs understand your tax liability. Always take advise from your CA or any tax expert to understand the exemption and reduce the tax burden.
Also Read: Looking for last-minute tax saving investments? MUST keep these things in mind
