How to Calculate Tax for Rental Income?

How to Calculate Tax on Rental Income?

• Add up all the rental income received during the financial year. This includes rent received for letting out property, parking space, furniture, etc.
• From the gross annual rental income, deduct a standard deduction of 30% to cover expenses such as repairs, maintenance, property taxes, insurance, etc.
• Subtract the standard deduction from the gross annual rental income to arrive at the net annual rental income.
• If there are any other rental incomes, such as income from sub-letting or letting out machinery, parking space, etc., add them to the net annual rental income.
• From the total rental income (including other rental incomes), deduct any municipal taxes paid during the financial year, if applicable.
• The annual value of the property is calculated based on certain factors, including the actual rent received or receivable, fair rent determined by the municipal authority, or the standard rent fixed under the Rent Control Act (if applicable). Choose the highest value among these options.
• From the annual value, deduct any property tax paid during the financial year, if applicable.
• If the property is on a home loan, you can deduct the interest paid on the loan during the financial year. The deduction is subject to certain limits and conditions.
• Subtract the deductions (property tax paid and interest on home loan) from the annual value of the property to arrive at the income from house property.
• Consider any other expenses related to the property that are eligible for deduction, such as repair and maintenance expenses not covered in the standard deduction, insurance premiums, etc.
• Add the income from house property to your other taxable incomes, such as income from salary, business, capital gains, etc., to arrive at your total income. Calculate your tax liability based on the total income and applicable tax slab rates for the financial year.