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Income tax on rental income

Vivek S (IT Program Manager) (27 Points)

31 January 2012  

Hi Friends,

I have a query regarding rental income. I undestand that rental income less than 1.8L are not taxable but anything above this will be taxed as a whole at 10%. Also there is a standard deduction can be applied to this income which is 30%.

Q1. Is this understanding re rental income and it's corresponding tax bracket correct, if not then please clarify?

Q2. Does one need to show proofs to get the 30% standard deduction on rental income?

Q3. If the above understanding is correct then if we assume the montly rental income as 25K then will the below tax calculation valid?

Total annual rental income = 25k x 12 = 3.0 lakhs. With 30% standard deduction on this [30%*3.0Lakhs = 90k]

Net taxable rental income = 3.0 L - 90k = 2.1 lakhs. So the tax payable is 10% * 2.1 lakhs = 21K  i.e. 1750 per month.

Really appreciated if you can confirm the above understanding. Thanks in advance !

Regards,

Vivek S.

 


 10 Replies

GOPAL AGGARWAL (DOING NOTHING) (1339 Points)
Replied 31 January 2012

Dear Vivek

Some of ur assumptions are wright but U have to pay only on the which is in excess of basic limit 1.8 lacs.

So U have to pay tax only on (210000-180000)=30000

Tax = 3000

EDUCATION CESSCess =90

Total Tax will be 3090/-

ur assumption that their is no tax on 1.8 lacs rent this is not correct.

Ur income upto 1.8 lacs is not taxed

after 1.8 to 5.00 u have to pay 10% on (INCOME -1.8 LACS)

AFTER 5.00 TO 8.00 U HAVE TO PAY 32000+20% ON (INCOME -5.00)

AFTER 8.00 U HAVE TO PAY FALT 30% ON THE BALANCE I.E. 92000+30%ON (INCOME -8.00)

AFTER TOTALLING THE TOTAL TAX ADD EDUCATION CESS @ OF 3% ON TOTAL TAX

1 Like

CA. Arpita Singhal (Partner) (100 Points)
Replied 31 January 2012

Rental income of a house(assuming ur query is for house property) is taxable as income from house property and at normal rates. Rental income will be calculated as:

Annual Rental income 

Less Taxes paid to municipality

Less Standard deduction, 30% of rental income

Less Interest paid on housing loan (if applicable)

The rental income will be added to total income.

To total income, Income tax slab rates will be applicable

1 Like

CA Sultan.........never quits (Financial Controller) (511 Points)
Replied 01 February 2012

Dear Vivek,

Gopal Aggarwal's tax computation is correct.

Please note the following.

1. If you had paid municipal taxes during the Financial year you can deduct the same from gross rent.

2.Dedcut 30% of net rent.

3.If you have taken any loan for the purpose of construction/purchase of property, interst on the loan also can be deducted.

4.The net amount is House property income.

5.If you have any other income it should be clubbed with House property income.

6.If the total income exceed's INR 1.8L then you need to pay tax asper the slab rates for the excess amount + surcharge of 3% on tax.

 

1 Like

CA Sultan.........never quits (Financial Controller) (511 Points)
Replied 01 February 2012

Dear Vivek,

Gopal Aggarwal's tax computation is correct.

Please note the following.

1. If you had paid municipal taxes during the Financial year you can deduct the same from gross rent.

2.Dedcut 30% of net rent.

3.If you have taken any loan for the purpose of construction/purchase of property, interst on the loan also can be deducted.

4.The net amount is House property income.

5.If you have any other income it should be clubbed with House property income.

6.If the total income exceed's INR 1.8L then you need to pay tax asper the slab rates for the excess amount + surcharge of 3% on tax.

 

1 Like

Roshan A (Chartered Accountant) (458 Points)
Replied 01 February 2012

The Basic exemption of Rs 180000 you talking about is related to Deduction of TDS on renting of plant & machinery and building.I dont think any such exemption is available in House Property taxation Sections of IT ACT.

1 Like

Vivek S (IT Program Manager) (27 Points)
Replied 01 February 2012

Dear Gopal, Roshan, Sultan and Arpita,

First of all, highly appreciated for your valuable time and efforts in clarifying my queries re rental income. Frankly speaking it's a big relief to me now.

By the way, the above income I was talking about is purely from rental income so as Gopal shown in his calculation will the basic exception of 1.8 L applicable to this rental income. Apologies in advance for asking this one more time.

I pay Propety Tax to municipal corp so I assume municipal tax that you all mentioned above is same as Property Tax. Please confirm.

Regards, Vivek S.

CA. Arpita Singhal (Partner) (100 Points)
Replied 02 February 2012

Yes Mr. Vivek..Property Tax is a part of Municipal tax & deductible from annual rental income.


(Guest)

Dear Vivek,

The It tax slab given above Gopal aggarwal will be correct and your computation will be

Annual Rental Income                                            =   3,00,000

Less : Municipal Tax                                                      NIL

Net Rental Income                                                       3,00,000

Less Deduction u/s 24 30% on Net Rental Income        90,000

HP Income                                                                   2,10,000

Less: Prepaid Taxes (TDS Receivable if any)               30,000  (lets assume)

Taxable Income                                                            1,80,000

For Individual Tax slab or AY 2012-13

0               to             180000            Nil

Note: If tds is deducted than your tax would be zero for individual payee for Firm or Company 30% + Education Cess (180000 * 30.9% = 55620)

Vivek S (IT Program Manager) (27 Points)
Replied 03 February 2012

Thank you very much to Arpita and Amol ! Really appreciated for your time in this regards.

Piyush D. Acharya (PROFESSIONAL) (61 Points)
Replied 27 March 2012

hi to all.

i want to know that, is thier any diffrence when rent income from house property and rent on machinery......


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