How much rent can you receive without paying any taxes in India? Know how and when rental income up to Rs 10 lakh becomes tax-free under New Tax Regime.
Tax-free rental income limit: Any income becomes taxable if it is above the basic exemption limit. This applies to rental income as well. However, if an individual is having income from rent only, s/he may be able to collect up to Rs 10 lakh without paying any taxes under the New Tax Regime, according to experts.
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According to Dr Suresh Surana, Founder, RSM India, rental income earned by any person shall be subjected to tax under Income from house property.
“However, it is pertinent to note that a taxpayer with total income (including rental income) below the applicable basic exemption limit shall not be required to pay income tax on such rental income,” says Dr Surana.
The taxpayer with a total income up to Rs 5 lakh becomes eligible to claim a full tax rebate u/s 87A of the Income Tax Act, thereby enabling a Nil effective tax rate. Moreover, with effect from FY 23-24, the said limit of Rs 5 lakh has been increased to Rs 7 lakh for taxpayers opting for the New Tax Regime under section 115BAC of the Income Tax Act, according to Dr Surana. The above means, if your only source of income is rents received from tenants, no taxability will arise for income up to Rs 7 lakh under the New Regime.
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However, tax experts say that one provision of the income from house property rules takes the tax-free rental income limit to even Rs 10 lakh.
“Rental income from house property is taxable after considering deduction towards specified expenditure. The property tax paid and the interest on the home loan are allowed as a deduction from income at actuals. A standard deduction of 30% on the net annual value is provided towards repairs and maintenance,” says Sudhakar Sethuraman, Partner, Deloitte India.
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As per Sethuraman, the 30% standard deduction provision results in only Rs 7 lakh as taxable income out of the total Rs 10 lakh collected as rent. As Rs 7 lakh is tax-free under New Regime, the landlord, who is having income only from rent, in this case, will not have to pay any taxes.
“An individual in the new tax regime can receive rental income of up to Rs 10 lakh without triggering any tax liability assuming no other income or deduction. After a 30% standard deduction towards repairs and maintenance on the rentals, the individual’s total income will be within the maximum exemption limit of Rs 7 lakhs,” says Sethuraman.
