Be honest! Wouldn't you enjoy the luxury of having a property that generates a steady rental income? If yes, then this blog is specifically designed for you. Having a property that helps produce a better financial strategy than owning assets that generate expenses is the best thing you can possess. Renting a property is a good way to secure a retirement plan in India. The income generated from the commercial or residential property is chargeable to tax. Finding a way to save tax on renting out your property is like a cherry on the top.
Exclude maintenance charges
If you wish to save tax, excluding the number of maintenance charges from the rent received is the easiest way to do so. In most cases of renting out your property, the society maintenance charges are a part of the rent received. It is the reason why landlords pay tax which includes maintenance charges which is not a rental income. To save yourself from these charges, you can add a clause in your rental agreement that tenants will have to pay maintenance charges directly to the association. If, for some reason, the tenant does not agree with this agreement, then, in that case, you should receive these two components separately from the tenant.
Get the mortgage interest deduction.
Another benefit of the Tax benefits of renting out your property list is that mortgage expenses obtained in the form of commissions and appraisal fees are not deductible. And they end up adding to your basis in the property. When refinancing the property for more than its actual worth, the property owner has the right to deduct additional amounts of interest and fees in case of an extra amount is used for the improvement and maintenance.
Check Out: Property Valuation Online
Depreciation deduction
Another special from the tax benefits of renting out your property list is the tax benefits one receives for the breakdown of the property over time. Depreciation begins from the time the landlord decides to rent out their property and ends when you stop renting it out. Instead of deducting the full value of depreciation, the landlord should deduct those costs over a period of time.
How to calculate income tax on rental income?
Tax received as an income from the property is one of the sources where the borrower is required to pay tax not limited to actual income but also on deemed rental from the property.
The Annual Taxable amount is calculated by deducting the municipal taxes that are paid and the deduction Under Section 24 from the amount received as an actual rent.
Two deductions are available Under Section 24-
Standard deduction of 30% of the amount received after the deduction of taxes from the rent.
The one paying tax on the ‘annual taxable value’ of the property is calculated after adjusting the following-
The gross annual value of the property
Less actual municipal taxes paid for the property
NAV
Less deduction is available Under Section 24
Repairs and maintenance allowance of 30%
This will provide you with the Annual Taxable Value of the property.
Also Read: Easy-to-follow tricks to save money on property tax bill