I need to lease out my 1-bhk home and plan to maneuver right into a 2-bhk residence taken on the next lease. What would be the tax implication on this?
—Name withheld on request
The taxability of earnings earned by you from let-out residential home property and the tax deductions accessible in direction of lease paid, are dealt below separate provisions, below the Indian income-tax legal guidelines.
Rental earnings from a let-out residential home property is chargeable to tax below the top ‘income from house property’. Deductions in direction of municipal taxes, commonplace deduction of 30% and curiosity on borrowed capital can be found to the extent prescribed. The home property earnings is taxable at relevant slab charges, plus relevant surcharge and cess. There are specified provisions for coping with loss from home property if any, relying upon the tax regime adopted by the person.
The following exemption/ deduction could also be accessible below the outdated tax regime, topic to fulfilment of related situations:
—In case you’re a salaried worker and are in receipt of home lease allowance (HRA) out of your employer, then, as per the provisions of part 10(13A) of the Income Tax Act, an exemption could also be accessible for the lease paid in opposition to the HRA acquired by an worker, calculated as least of the next: precise HRA acquired; or lease paid, much less 10% of primary wage and dearness allowance, or 50% of primary wage and dearness allowance (40 % in case the rented property isn’t located at Mumbai or Kolkata or Delhi or Chennai).
In case you aren’t in receipt of HRA, then deduction below part 80GG of the Act could also be accessible from gross complete earnings, topic to least of the next: lease paid, much less 10% of your complete earnings; or ₹5000 per thirty days; or 25% of your complete earnings.
Total earnings shall be the taxable earnings earlier than permitting deduction for any expenditure below this part.
The following extra situations are to be fulfilled for availing such deduction: rented lodging ought to be occupied by you in your personal residence; no lodging ought to be owned by you or your partner or your minor baby on the place the place you ordinarily reside or carry out your employment or carry your online business or occupation; no lodging is owned by you at some other place, which is both thought-about as self-occupied or deemed let loose for the aim of computing earnings from home property; and a declaration in Form 10BA is filed by you within the prescribed method, for claiming the deduction.
Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.
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Updated: 20 Aug 2023, 10:48 PM IST