Clarification on Reporting Rental Income: New Tax Rules from April 2025



Quick Summary
New tax regulations are coming into effect from April 1st, 2025, regarding the reporting of rental income. Previously, some individuals were incorrectly reporting income from letting out property under 'Profits and gains of business or profession' to reduce their tax liability. The upcoming amendment clarifies that income from letting out a residential house, or part of it, must be reported under the 'Income from house property' head.

Reporting of income from letting out of house property under 'Income from House Property'

Section 28 of the Act specifies kinds of income that shall be chargeable to income-tax under the head 'Profits and gains of business or profession'.

2. It has been observed that some taxpayers are reporting their rental income generated by letting out of the house property, under the head 'Profits and gains of business or profession' in place of the head 'Income from house property'. Accordingly, they are reducing their tax liability substantially by showing house property income under the wrong head of income.

Rental Income Tax Rules Change April 2025

3. In view of the same, it is proposed to amend the section 28 of the Act so as to clarify that any income from letting out of a residential house or a part of the house by the owner shall not be chargeable under the head “Profits and gains of business or profession” and shall be chargeable under the head “Income from house property”.

4. This amendment will take effect from the 1st day of April, 2025 and will, accordingly, apply in relation to assessment year 2025-26 and subsequent assessment years.

[Clause 11]

FAQ :

The new rules will take effect from the 1st day of April, 2025.

The clarification ensures that income from letting out a residential house or part of it must be reported under the 'Income from house property' head, not under 'Profits and gains of business or profession'.

The change is being made because some taxpayers were incorrectly reporting rental income under the 'Profits and gains of business or profession' head, which allowed them to substantially reduce their tax liability.

These rules will apply to assessment year 2025-26 and subsequent assessment years.

The clarification specifically addresses income from letting out of a residential house or a part of the house by the owner.




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Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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