Reconstructed a building after modification into a commercial property which could give rent of atleast 70000/month. In which mode rent should be taken? Can this rent be taken in cash to reduce tax? If in any other mode then can it be taken in the spouse's account to reduce tax burden? What to be taken into consideration while framing this rent agreement?
Here's some notes on it.
1. Rent must be reported as income regardless of cash/bank/UPI. “Not taking bank” doesn’t make it non-taxable. Large cash transactions above ₹20K can attract penalties under Income Tax Act.
2. If building is jointly owned, rent can be split as per ownership %. If it’s only in your name, you can’t just “put in spouse name” to shift tax unless there’s a valid gift/transfer + registration. Clubbing provisions apply if money is transferred without real transfer of asset.
3. *Deductions allowed u/s 24*:
- Standard deduction: 30% of rent after municipal taxes
- Municipal/property tax actually paid
- Interest on home loan if any, on let-out property
4. TDS u/s 194-IB if tenant is individual/HUF paying >₹50K/month. Tenant deducts 5% TDS.
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