Save tax on Rental Income in India when Rental Income over allowed tax
free amount
Deductions allowed to lower rental income for tax purposes
Many Non-residents, NRI/OCI and foreigners of Indian origin rent out property they own in India, or perhaps purchase a property for investment purposes and decide to rent it out for a few years. Tax filling in India is usually required when an individual’s income crosses the allowed tax free income slab in a financial year. Many people who were renting their properties in India and the only income they perhaps have in India is rental income may now find that as rents rise in India, they may be collecting rent that has gone over the allowed tax free income slab. This article is for the benefit of such people, who may suddenly find that they now need to file a tax return in India and pay Indian income tax. For the financial year 2015-2016 for general tax payers, income up to Rs. 2, 50,000 is tax free. Consider the following scenarios: 1. Suppose an individual has only rental income in India from rental property which is rented at say Income up to Rupees 20,000 per month. The total rental income received for the year is 20,000 x 12 = 2, 40,000/-. Hence within the tax free income slab. 2. Now suppose the rent goes up next year to Rupees 25,000 per month. 2. Now the total rental income for the year is 25,000 x 12 = 300,000/- This amount is Rupees 50,000/- over the allowed tax free slab. So now is the rental income taxable? Perhaps not! Read on . . . Please note: The proposed income tax slabs under the new tax regime for financial year 2025-26 upto Rs. 4 lakh is tax freeTax deductions allowed on rental property in India
When it comes to calculating rental income on properties in India. Landlords are allowed a few types of tax deductions on the income they receive from their property as rent. Deductions such as the amount paid as municipal taxes help, however some NRIs may not be aware that there is also a standard deduction of 30% of the rental income received allowed. This makes a big difference for landlords. Just by using the 30% standard deduction in the above scenario where rental income is Rupees 300,000. The rental income becomes Rs. 300, 000 less 30% = Rupees 2, 10,000/- which is below the tax free slab of Rupees 2, 50,000/-How to Reduce Tax on Rental Property in India – NRI Taxes
If you have a property in India rented out, then the rent received is your Gross Annual Value. The Net Annual Value here is determined by deducting the Municipal Taxes paid for the property from the Gross Annual Value. To clarify: Total rent less Municipal taxes paid = Net Gross Annual Value.Deductions allowed from Rental Income
Under section 24 of the Income Tax Act, a standard deduction of 30% of the Net Annual value is allowed on rental property. This deduction is allowed regardless of whether the actual expenditure on the property is higher or lower. Another deduction that is also allowed is the deduction of Interest on home loan for a property. This could be loans for the purpose of things like: house purchase, repair etc. Such interest is allowed as a deduction from the Net Annual Value. For the taxation year 2015-2016 the deduction allowed is up to Rupees two lakh. If Loan is taken for purpose of Repair then no tax deduction allowed for Interest paid before Completion. Non-Residents should consult a tax accountant/chartered accountant of their choice for information and help to seek out and claim deductions that may reduce your tax liability in India.
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a
professional accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation
between what has been stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail.
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Save tax on Rental Income in
India when Rental Income
over allowed tax free amount
Deductions allowed to lower rental
income for tax purposes
Many Non-residents, NRI/OCI and foreigners of Indian origin rent out property they own in India, or perhaps purchase a property for investment purposes and decide to rent it out for a few years. Tax filling in India is usually required when an individual’s income crosses the allowed tax free income slab in a financial year. Many people who were renting their properties in India and the only income they perhaps have in India is rental income may now find that as rents rise in India, they may be collecting rent that has gone over the allowed tax free income slab. This article is for the benefit of such people, who may suddenly find that they now need to file a tax return in India and pay Indian income tax. For the financial year 2015-2016 for general tax payers, income up to Rs. 2, 50,000 is tax free. Consider the following scenarios: 1. Suppose an individual has only rental income in India from rental property which is rented at say Income up to Rupees 20,000 per month. The total rental income received for the year is 20,000 x 12 = 2, 40,000/-. Hence within the tax free income slab. 2. Now suppose the rent goes up next year to Rupees 25,000 per month. 2. Now the total rental income for the year is 25,000 x 12 = 300,000/- This amount is Rupees 50,000/- over the allowed tax free slab. So now is the rental income taxable? Perhaps not! Read on . . . Please note: The proposed income tax slabs under the new tax regime for financial year 2025-26 upto Rs. 4 lakh is tax freeTax deductions allowed on rental
property in India
When it comes to calculating rental income on properties in India. Landlords are allowed a few types of tax deductions on the income they receive from their property as rent. Deductions such as the amount paid as municipal taxes help, however some NRIs may not be aware that there is also a standard deduction of 30% of the rental income received allowed. This makes a big difference for landlords. Just by using the 30% standard deduction in the above scenario where rental income is Rupees 300,000. The rental income becomes Rs. 300, 000 less 30% = Rupees 2, 10,000/- which is below the tax free slab of Rupees 2, 50,000/-How to Reduce Tax on Rental
Property in India – NRI Taxes
If you have a property in India rented out, then the rent received is your Gross Annual Value. The Net Annual Value here is determined by deducting the Municipal Taxes paid for the property from the Gross Annual Value. To clarify: Total rent less Municipal taxes paid = Net Gross Annual Value.Deductions allowed from Rental
Income
Under section 24 of the Income Tax Act, a standard deduction of 30% of the Net Annual value is allowed on rental property. This deduction is allowed regardless of whether the actual expenditure on the property is higher or lower. Another deduction that is also allowed is the deduction of Interest on home loan for a property. This could be loans for the purpose of things like: house purchase, repair etc. Such interest is allowed as a deduction from the Net Annual Value. For the taxation year 2015-2016 the deduction allowed is up to Rupees two lakh. If Loan is taken for purpose of Repair then no tax deduction allowed for Interest paid before Completion. Non-Residents should consult a tax accountant/chartered accountant of their choice for information and help to seek out and claim deductions that may reduce your tax liability in India.
