For millions of individuals in India, income from residential property is a significant source of passive income. The Income Tax Act of 1961 requires that income from real estate be taxed, and the legal owner who gets the income from the property is responsible for paying tax. A house property might be your residence, place of business, store, a structure, or any land that is connected to the building, such a parking lot. The Income Tax Act does not distinguish between residential and commercial property, which is important to note.
Here are a few things to bear in mind about the taxes of revenue from real estate.
In the income tax return, all sorts of properties are taxed under the “income from house property” heading.
A property is taxed under the “income from business and profession” category if it is utilized for commercial purposes or any other kind of vocation.
Any property that comes under the category of “House Property” has a taxable value that is basically equal to its yearly worth.
The Income Tax Act's Sections 22 to 27 deal with the taxation of income from real estate.
Following the application of a standard deduction equal to 30% of the rent you received, income chargeable under the heading “Income from house property” must be determined, according to Section 24 of the Income Tax Act.
In addition to the standard deduction, you may deduct the interest paid on any loans made to purchase, build, renovate, or repair the property. You may deduct up to Rs 2 lakh for a maximum of two self-house properties combined if the home is self-occupied.
The yearly value of residential properties is used to compute taxable income from residential properties.
You may reduce the amount of revenue from real estate you pay.
If you and your spouse took out a mortgage jointly, you are both eligible for a tax break on the principle and interest payments.