TomorrowMakers

The rules of deemed rental will be followed if a person owns more than two houses and they are unoccupied. Read on to know more!

rental income from vacant house properties
  • Understanding the basics of deemed rent and when it’s applied.
  • What is rental income and how is income calculated from house property?
  • Calculating deemed rental income and understanding the various terms associated with it.

For anyone who is a property owner, several legalities are involved. This also includes taxes on property that is rented out or one lying vacant. That’s where deemed rent comes into play, and in this article, we will look at how to calculate deemed rental income.

What is Deemed Rent?

An individual can claim various properties, but when a proprietor rents out one of his properties, it is called deemed rent-out property. If a person owns more than one property, any one of them will be considered for self-occupation under Section 23 (1) (A) of the Income Tax Act of 1961.

Also Read: How To File An ITR If You Own Multiple Properties?

What is Rental Income?

When you rent out your property, the total amount of rent you receive along with any related payments is referred to as your rental income.

  • Rent for the building and its upkeep.
  • Rent for furnishings and facilities.
  • Taxable rental earnings from subletting exist. Based on the number of rooms rented, property owners are required to divide the allowable expenses.
  • Finally, if you have recovered money from insurance on the rented property, the money is taxable and must be reported as income.

A common question is also about how to calculate income from house property. And there are two steps involved in determining house property income. The first step is to determine the property's annual value, and the second is to allow certain deductions from that value to determine the tax-paying portion of the property's income.

Also Read: How To Protect Your Belongings When Living On Rent?

How to Calculate Deemed Rental Income?

  • Determine the Gross Annual Value of house. A self-occupied house has a GAV of zero. It is the house's rent that is collected for a let out property.
  • When paid, property tax can be deducted from a property's GAV.
  • Then the calculation of net asset value (NAV) is done. To find the net asset value or NAV, this is the formula used: (Assets - Liabilities) / Total number of outstanding shares.
  • 30% on NAV is permitted as a deduction from the NAV under Section 24 of the Income Tax Act. In accordance with this section, no other expenses, such as painting and repairs, can be claimed for tax relief beyond the 30% cap.
  • Determine the income from house property and the value you get is the money you make from your home. This will be taxed at your individual slab rate.
  • A self-occupied home has no Gross Annual Value, claiming a house loan interest deduction will result in a loss on the property. You can subtract this loss from the income from other heads.

In simple words, the rules of deemed rent are followed if and when a person owns more than two houses and the additional houses are unoccupied. There’s a certain way to calculate the income tax associated with deemed rental income, and it’s important to understand it.

 

 

 

 

 

 

 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

 

Sources:

 

  • cleartax.in
  • investopedia.com

 

Click here for the latest articles on Real Estate

 

  • Understanding the basics of deemed rent and when it’s applied.
  • What is rental income and how is income calculated from house property?
  • Calculating deemed rental income and understanding the various terms associated with it.

For anyone who is a property owner, several legalities are involved. This also includes taxes on property that is rented out or one lying vacant. That’s where deemed rent comes into play, and in this article, we will look at how to calculate deemed rental income.

What is Deemed Rent?

An individual can claim various properties, but when a proprietor rents out one of his properties, it is called deemed rent-out property. If a person owns more than one property, any one of them will be considered for self-occupation under Section 23 (1) (A) of the Income Tax Act of 1961.

Also Read: How To File An ITR If You Own Multiple Properties?

What is Rental Income?

When you rent out your property, the total amount of rent you receive along with any related payments is referred to as your rental income.

  • Rent for the building and its upkeep.
  • Rent for furnishings and facilities.
  • Taxable rental earnings from subletting exist. Based on the number of rooms rented, property owners are required to divide the allowable expenses.
  • Finally, if you have recovered money from insurance on the rented property, the money is taxable and must be reported as income.

A common question is also about how to calculate income from house property. And there are two steps involved in determining house property income. The first step is to determine the property's annual value, and the second is to allow certain deductions from that value to determine the tax-paying portion of the property's income.

Also Read: How To Protect Your Belongings When Living On Rent?

How to Calculate Deemed Rental Income?

  • Determine the Gross Annual Value of house. A self-occupied house has a GAV of zero. It is the house's rent that is collected for a let out property.
  • When paid, property tax can be deducted from a property's GAV.
  • Then the calculation of net asset value (NAV) is done. To find the net asset value or NAV, this is the formula used: (Assets - Liabilities) / Total number of outstanding shares.
  • 30% on NAV is permitted as a deduction from the NAV under Section 24 of the Income Tax Act. In accordance with this section, no other expenses, such as painting and repairs, can be claimed for tax relief beyond the 30% cap.
  • Determine the income from house property and the value you get is the money you make from your home. This will be taxed at your individual slab rate.
  • A self-occupied home has no Gross Annual Value, claiming a house loan interest deduction will result in a loss on the property. You can subtract this loss from the income from other heads.

In simple words, the rules of deemed rent are followed if and when a person owns more than two houses and the additional houses are unoccupied. There’s a certain way to calculate the income tax associated with deemed rental income, and it’s important to understand it.

 

 

 

 

 

 

 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

 

Sources:

 

  • cleartax.in
  • investopedia.com

 

Click here for the latest articles on Real Estate