How Much Rental Income Taxable?

Before answering your question, let us understand ‘is rental income taxable or not’. Well, rental income earned from letting out a property is taxable under the Income Tax Act, 1961, in India. The amount of rental income taxable depends on various factors, including 

• Whether the property is let out for residential or commercial purposes

• Deductions available under Section 24

• Any other applicable exemptions. 

Generally, gross rental income is subject to taxation at the individual's applicable income tax slab rate after allowing for deductions such as standard deduction of 30% and municipal taxes paid. However, if the total annual rental income exceeds ₹2,50,000, the landlord must also consider the provisions of TDS (Tax Deducted at Source) on rent.

Now that you have a clear answer to the question - is rental income taxable in india, lets deep dive into the provisions of income tax on rent.

How Much Rental Income Taxable for Residential Properties?

For residential properties, rental income is taxable under the heading "Income from House Property" in India. 

The Gross Annual Value (GAV) of the property, which is the potential rental income, is calculated after considering factors like:

1. Actual rent received

2. Municipal valuation

3. Standard deductions. 

After deducting municipal taxes and the standard deduction of 30%, the remaining income is added to the individual's total income and taxed at the applicable slab rates. 

However, if the property is self-occupied or not let out, the rental income is considered NIL for tax purposes.

How Much Rental Income Taxable for Commercial Properties?

Rental income from commercial properties is taxable as business income under the Income Tax Act. The gross rental income received from commercial properties is added to the taxpayer's total income, and deductions such as: 

• Property taxes

• Maintenance expenses

• Interest on loans can be claimed against this income 

After accounting for deductions, the net rental income is taxed at the individual's applicable income tax slab rates. 

Additionally, if the total rental income exceeds ₹2,50,000 per annum, the tenant is required to deduct TDS at the specified rates before making the payment to the landlord.