Many move from villages to towns and cities for higher education and employment. Since commuting from their hometowns to college and work is challenging, they rent houses in the town.
Due to this influx of people, the city’s population is rapidly increasing, leading to a rise in house rents. Landlords are now making a significant amount of money each month from renting out their properties, effectively turning it into a business.
The central government has recently introduced new rules concerning house rent. Landlords must now disclose their rental income to the government and face penalties if they fail. Let’s take a closer look at these new rules.
Many landlords used to hide their rental income and bypass the government by not entering into rental agreements. However, the government has now enforced new rules mandating that rental income cannot be concealed.
Under the new regulations, landlords must declare their rental income under ‘Income from House Property.’ Failure to do so may result in an arrest on tax evasion charges.
The rental income must be reported to the government and taxed, and a rent agreement is now mandatory. Landlords should keep receipts for these agreements, as failure to declare the total rental income can lead to hefty fines.
The government implemented these rules to increase tax revenue, ensure equitable tax payment, and penalize tax evaders.
Income from House Property refers to the money received from renting out a house. The government collects tax on this income, and these new rules are already in effect.
Individuals are required to adhere to these rules when filing tax returns for the financial year 2024-25. Providing false information about house rent income is punishable.
However, the government is offering some tax relief to alleviate the financial burden on property owners. Under the new rules, homeowners can claim a standard deduction of up to 30% while paying tax on house rental income.
This deduction can cover maintenance and repair costs. Moreover, homeowners who have taken a loan on the property for rent and are still repaying it can also claim deductions on loan interest.
Renovation expenses can also be declared, and corresponding deductions can be claimed. Tenants will also need to provide proof of identity.
Homeowners are likely to increase rents to reduce their tax burden. The Government of India is promoting digital rent payment, making tracking income easier.