6) Understanding Taxation of Rented Property Income
As a landlord, you'll have to declare your income and costs You'll find that the tax laws are actually quite generous in allowing you to offset a large number of costs including the interest payments on your loan. Non residents & Residents earning rental income are taxed at progressive rates. In case of co-ownership, of property both parties are taxable separately Taxable income is computed on the basis of the actual rental value of the property, or the government-determined rental value, whichever is higher. A standard deduction of 30% is granted for repairs and collection charges. Interest payments relating to loans used for the construction, acquisition, and repairs of the property are also entirely deductible. This can be a bit more complex so if you need to know more, you are advised to consult a tax consultant. We will be happy to provide you with one.| Tax Example: Rent | ||||
| Non-resident Individual monthly rental income1 |
50,000 |
100000 |
150000 |
|
| Gross Rental Income |
600,000 |
1,200,000 |
1,800,000 |
|
| Less Municipal/ Property Taxes2 |
-48000 |
-72,000 |
-96,000 |
|
| Net Annual Rental Value |
552,000 |
1,128,000 |
1,704,000 |
|
| Less Costs Deductable (30%)3 |
-180,000 |
-360,000 |
-540,000 |
|
| Less interest charged on Home Loan (No ceiling) |
-50,000 |
-200,000 |
-500,000 |
|
| Taxable Rental Income |
322,000 |
568,000 |
664,000 |
|
| Income Tax Rates4 | ||||
| Up to INR180,000 | nil | - | - | - |
| INR 180,001 – INR 5,00,000 |
10% |
14200 |
32000 |
32000 |
| INR 5,00,001 – INR 800,000 |
20% |
0 |
13600 |
32800 |
| Over INR 800,000 |
30% |
0 |
0 |
0 |
| Total Income Tax |
14200 |
45600 |
64800 |
|
| Additional Taxes | ||||
| Surcharge5 |
10% |
1420 |
4560 |
6480 |
| Education cess6 |
2% |
284 |
912 |
1296 |
| Annual Income Tax Due |
15904 |
51072 |
72576 |
|
| Tax Due as % of Gross Income |
2.65% |
4.26% |
4.03% |
|
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