4 Clever Tips to save tax on your Rental Income

Yes, you have read it right, the law provides for a concession on the rented income in India. But how actually can you achieve it? Let’s find out!

Claim Deduction on Your Rent

The Gross Annual Value (GAV) is applicable only for income tax on rent received. This means that the owner can claim a deduction in the amount of rent if he has not received it. Moreover, if the property is rented for less than fourteen days, the owner can deduct the cost from its GAV. In case of any loss of rent in unoccupied or unrealized property, the rent adjustment has to be from the actual rent received which would also disclose the GAV of the property.

Municipal Taxes Deduction

Municipal taxes paid are deducted from the GAV to reach Net Annual Value (NAV). However, it can only be levied if it was paid by the landlord in the fiscal year. Municipal taxes like sewage and property taxes can be excluded from rental income tax. Though, it must be understood that all the municipal taxes have to be paid by the landlord and not the renter. These payments cut down on the rental income and reduce the tax burden.

30% Standard Deduction

Section 24(a) of the Income Tax Act of 1961 allows a rebate of 30% on the NAV of the property. However, other costs like painting and repairs cannot be claimed as tax deductions for more than 30% under this provision.

Conditional Deduction

If the owner or his family resides in the house then section 24(b) enables him of a rebate up to Rs 2 lakhs on the interest of his home loan. On the other hand, if the property is rented out then the entire home loan interest can be deducted. This deduction is also applicable on property that is self-occupied provided the three below conditions are met, failing which the deductions would be restricted to mere Rs. 30,000 instead of Rs. 2 lakh.

These requirements are:

• Whether the loan is availed before 01-04-1999 for erecting or buying the property
• Whether the loan is availed on or after 01-04-1999 for rebuilding, revamping, or renewing the property
• Whether the loan is availed on or after 01-04-1999 however, the construction of the property remains uncompleted within five years from the closing of the earlier year when the loan was availed

You can expect SMC Real Estate Advisors to help you buy your dream home at the best possible rates from the prominent builders in the country. Live in your own home and enjoy the security that it brings.