tax on rental income
If your only source of income is house or shop rent, then it would not be right to assume that you do not need to file Income Tax Return (ITR). In many cases, filing ITR may be mandatory even if there is only rental income.
Actually, the responsibility of filing ITR depends on what is your total taxable income and not on the sources of your income. If your total income exceeds the prescribed exemption limit or you have made certain high-value financial transactions, you must file ITR.
How is rental income taxed?
Rent received from residential or commercial property comes under the category of “Income from House Property”. The landlord has to give information about the rent received or to be received during the financial year in ITR.
Even if your income is only from rental, you will still have to file ITR if your taxable income exceeds the basic exemption limit of Rs 3 lakh in the new tax regime and Rs 2.5 lakh in the old tax regime. This limit is applicable for general taxpayers below 60 years of age.
What exemptions are available on rental income?
Before filing ITR, the Income Tax Department allows deduction of certain expenses, which reduces your taxable income. These include.
- Municipal Corporation or Municipal Taxes
- Standard deduction of 30% for maintenance and repairs of property
- Interest paid on home loan (under section 24(b)), if the property is purchased against the loan
Tax is calculated on the amount remaining after these deductions.
What is the difference between the new and old tax system?
According to Deepashree Shetty, tax expert, BDO India, rental income is taxable in both the tax regimes. However, in the new system, if there is loss from house property, it cannot be set-off with other income, whereas this facility is available in the old system.
How does the 30% standard deduction work?
Under the Income Tax Act, the landlord gets a fixed deduction of 30% on the Net Annual Value of the property. For this it is not necessary to provide proof of actual expenditure. Whether the expenditure on repairs has increased or decreased, the deduction will always remain 30%.
Which ITR form to fill?
If your income is limited to rent from only one house and the total income is up to Rs 50 lakh, then you can fill ITR-1. But if your situation is more complex or the conditions of ITR-1 are not met, then ITR-2 will have to be filed.
What happens if you hide rental income?
If you do not file ITR despite having rental income or do not give correct information about the income, the Income Tax Department can take penalty, interest and scrutiny action. Therefore, it is very important to file ITR on time and with correct information.
The last date for filing ITR for financial year 2025-26 (assessment year 2026-27) is 31 July 2026. Failure to file returns on time may also result in penalty under Section 234F of the Income Tax Act.
