According to the Income Tax Act in India, income from property is considered taxable. This tax is levied on income derived from a commercial, residential or industrial property. If income is received from a property, the owner of the property is required to pay tax on the actual income as well as the rental tax received from the property. Deemed rentals are analyzed by estimating the potential income that a property can achieve keeping in mind the parameters and dynamics of the market.
Rental Houses Tax on Property Income
Income from self-occupied property is
deemed to be income from rented property and vacant property i.e other than
self-occupied house, is taxable under the section "Income from
property". The taxpayer is required to pay tax on the "annual taxable
value" of the property, which is calculated after adjusting the deduction
under section 24 from the Net Annual Value (NAV) of the property.
Tax waiver of 10-years
In lieu of the decline and slowdown in
investment in the real estate sector, the Finance Ministry is open to
considering a 10-year tax waiver for real estate developers on the gains from
rental housing. This can be detrimental to supporting revived investments and
subsequently promoting a slowing economy.
Pleading by Real Estate Industry
To address this issue, real estate
developers have been directed by the ministry to make suggestions to address
the challenges faced by the industry. In addition, developers have been asked
to present a rental business model where deductions are reimbursed and exempted
from taxes for a period of 10 years. The real estate industry has long been
demanding that the government take steps to rectify liquidity shortages due to
lack of funds from banks and NBFCs.
Current GST Waivers
Earlier in 2019, the GST Council dropped
GST on sluggish housing to 1% on affordable housing and GST on 8% (without
input tax credit) on under-construction houses to boost sluggish demand. In
real estate. In addition, for ongoing residential projects, builders have the
option to choose between the old GST and the new GST to facilitate input tax
credit issues.