One of the most common ways to earn passive income is through owning a house property. When you rent out your property or use it for any purpose other than personal use, you can earn an income taxable under the Indian Income Tax Act. In this article, we will look at what income from house property is, the different types of income you can earn, and how to calculate your taxable income.
What is Income from House Property?
Simply put, income from house property can be defined as any money you earn from renting a property you own. This could include income from renting out a house, flat, or any other type of dwelling. The income you earn is taxable as per the Income Tax Act. It is important to understand the rules and regulations surrounding this type of income to declare it correctly and avoid any penalties or fines.
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Types of Income from Commercial Property in Mumbai
There are two main types of income from house property:
Rental income: This refers to the income you earn from renting out a property. It includes the rent you receive from tenants and any other benefits or allowances you receive in connection with the property.
Deemed rental income refers to the income you earn from a property you own but do not rent out. If you own a property that is not rented out and is not used for personal purposes, it’s considered to be a “deemed to be let out” property. In this case, you’ll be taxed on the “deemed rental income” of the property, which is calculated based on a percentage of the property’s value.
How to Calculate the Gross Annual Value of Commercial Property in Mumbai?
The Gross Annual Value of a Commercial Property in Mumbai could fetch if it were to be let out. The GAV is used to calculate the taxable income from house property. To calculate the GAV, you’ll need to consider the following factors:
The rent received or receivable: This is the rent you receive from tenants or that you could receive if the property were let out.
Municipal taxes paid: If you’re renting out your property, you’ll need to consider any municipal taxes you pay.
Standard rent: If the rent you receive is lower than the standard rent for the property, you’ll need to use the standard rent to calculate the GAV. The local rent control authority determines the standard rent.
How to Calculate Income from Commercial Property in Mumbai?
Once you have calculated the GAV of your property, you’ll need to subtract any allowable deductions to arrive at your taxable income from your house property. The main deductions you can claim include the following:
Repairs and maintenance: You can claim a deduction for any expenses incurred in repairing or maintaining the property.
Home loan interest: If you have a home loan, you can claim a deduction for the interest you pay on loan.
Property taxes: You can claim a deduction for any property taxes you pay.
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Claiming Deduction on Home Loan Calculation of Income from House Property
If you have a home loan, you can claim a deduction for the interest you pay when calculating your taxable income from your house property. The deduction is available under Section 24 of the Indian Income Tax Act and is capped at Rs. 2 Lakhs per financial year. To claim the deduction, you must provide proof of the home loan interest payment, such as a bank statement or loan statement.
Real estate investments are considered extremely profitable, thanks to the increasing value of the land. However, you must have a bit of financial and legal knowledge. We hope this blog has helped you understand in detail how you can earn from your house property.