How much income tax is payable on rental income
In order to assess the accurate income tax liability at the time of filing income tax returns, a user has to calculate the total earnings in a particular financial year or an assessment year.
New Delhi: There have been a number of income sources and expense heads which are required to be evaluated at the time of calculating the total income tax liability. In order to assess the accurate income tax liability at the time of filing income tax returns, a user has to calculate the total earnings in a particular financial year or an assessment year. The income from salary, investments, interest earned on deposits, capital gains on equity and equity-related investment and income earned from rental property are some of the most common sources of income.
The income earned from the rental house or any other tangible real estate asset has to be collated to assess the taxable portion of the income. Further, the tax rate applicable to the income from a rental property is subject to the assessee, i.e., under which tax slab the assessee is falling.
The income from property which is let out throughout a year can be calculated by assessing the effective income from the house property by subtracting ‘municipal taxes paid during the year’, ‘deduction under Section 24’, ‘deduction under Section 24(a) at the rate of 30 per cent’ and ‘deduction under Section 24(b) on account of interest paid on borrowed capital’ from the ‘gross annual value of property’.
The gross annual value of the property can be calculated by computing reasonable expected rent of the property and the actual rent of the property let-out throughout a year. Following the calculation of the aforementioned calculations, the total rental income is added to the annual income and is taxed accordingly with the respective income tax slabs.
According to the Income Tax Department, the rental income in the hands of the owner is charged to tax under the head “income from house property”. Rental income of a person other than the owner cannot be charged to tax under the head “income from house property”. Hence, rental income received by a tenant from subletting cannot be charged to tax under the head “income from house property”. Such income is taxable under the head “income from other sources” or profits and gains from business or profession.
[“source=timesnownews”]