What you need keep in mind while reporting rental income during income tax filing?
Edited transcripts
Udayan Ray: Welcome, FundooMoney web series on tax filing. We are discussing various aspects people need to keep in mind while filing taxes.
In this segment, we will discuss the tax deductions a person is eligible for, if he or she has given his property out on rent.
The great news is that with me is eminent tax expert Swami Saran Sharma. Welcome Swami!
Swami, a person started letting out his or her property last year and started getting those rent cheques which everyone welcomes. Now, how does it get treated in tax terms and what do you have to keep in mind when you are filing for taxes?
Swami Saran Sharma: As a standard deduction, 30% of the income that one earns in rentals is given as basic deduction. So, if you get a rent of Rs 100,000 out of which Rs 30,000 is exempt. The tax is payable on the remaining 70% which is included in the total income of the assessee.
There are further deductions in the other exemptions on that amount. If you have raised a loan to construct the same property, the interest paid on that amount is eligible for deduction even if it means that a loss arising out of the whole proposition. In the same example, interest paid on the loan is Rs 200,000, the taxable income is only Rs 70,000. The assessee is eligible to claim a loss of Rs 130,000.
Udayan Ray: Which means that from taxable income Rs 1.3 lakh gets deducted. This is a great-great route by which you can lessen your taxable income.
That’s a lot of useful information. Swami! Thank you, so much.
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