Income tax on rental income

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Mahesh

Techology Architect

27 Points Posted on 20 October 2013

Dear Members,

I would like to get understanding on how to compute income tax liability on rentals received.

Q1: I am not clear rentals upto HOW MUCH rental amount are not taxable? Is it 1.8 Lacks or 1.5 Lacks?

Q2: To get the standard deduction of 30%, do one need to show any proof?

Q3: What about Housing loan Principle deduction of 1 lack and Interest deduction of 1.5 lacks?

If the above understanding is correct then if we assume the montly rental income as 28K then will the below tax calculation valid?

Total annual rental income = 28k x 12 = 336000.

I paid Propery Tax of 5800/-, So Net Annual Income (336000 - 5800) = 330200

Standard Deduction @ 30% of Net Annual Value (0.3 * 330200) = 99060

Then my Housing Loan Interest is 1.5Lack (section 24) and Principle is 1 Lack (section 80c)

So Net taxable rental income = 330200 - 99060 - 150000 = 81140.

Q4: So Total Tax due to rentals at 30% income slab = 81140 * 0.3 = 24342/-

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

Regards,

Mahesh

Replies (9)

Mihir

Wealth Manager

5358 Points Posted on 21 October 2013

Rental income, if owned, is taxed under the income from house property. If the rental income exceeds Rs. 180,000/- , then TDS deduction will apply. If the rental income and/or total income of an individual exceeds Rs. 200,000/-, then it will taxed at normal rates.

If the property is owned then you can avail 30% deduction or if it is subletting then the it is taxed under income from other sources. Under income from other sources, 30% deduction is not available.

Your calculation is correct. You can avail 30%, interest part of the loan u/s 24, and principal part of the loan u/s 80C.

In the above example, the income is below taxable limit, so there shall be no tax. Instead you can be eligible for refund as TDS has been deducted where there is no tax liability.

CA Pallav Singhania

IT System Auditor

19347 Points Posted on 21 October 2013

For detail info related to income from House Property..

/forum/details.asp?mod_id=268511&offset=1

Mahesh

Techology Architect

27 Points Posted on 21 October 2013

Dear Mihir,

Thanks for your confirming the understanding and computation.

One last doubt remains - "In the above example, the income is below taxable limit, so there shall be no tax. Instead you can be eligible for refund as TDS has been deducted where there is no tax liability."

Can you please explain "How / where TDS has been deducted?"

Regards,

Mahesh

Mihir

Wealth Manager

5358 Points Posted on 22 October 2013

If the rental income exceeds 180,000/- pa, TDS u/s 194I has to be deducted at 10%. Yours is 336,000/- pa

Mahesh

Techology Architect

27 Points Posted on 22 October 2013

Dear Mihir,

Sorry for asking this Q again.

Final Q now - Do you mean final tax liability will be 10% TDS of 336,000/- plus 24342/- = 57942

Then where is Q of refund that you mentioned above?

Regards,

Mahesh

Mihir

Wealth Manager

5358 Points Posted on 22 October 2013

All information is given above. Tax exemption is upto 200,000/-. If your income is less than 200,000/- and TDS has been deducted, will you or will you not be eligible to get refund? Unless of course your other income exceeds this limit.

CA Mitesh N Kothari

9821662799

382 Points Posted on 22 October 2013

If your total income consist only of rent from house property then your total income is below basic exemption limit of Rs 2 Lac therefore you are not liable to pay any tax.

Just file your income tax return and claim refund of your Tds RS 33600/-