Filing ITR is mandatory for rental income if it exceeds the basic exemption limit. Learn the rules, deductions, and which form to use.
The Income Tax Department does not consider how many sources your income comes from, but whether your total income exceeds the tax exemption limit.
Even if your sole income is from rent, you will have to file an ITR. It is mandatory to file a return if your gross total income exceeds the basic exemption limit.
However, the tax is not calculated directly on the entire rental amount. First, the taxes paid to the municipal corporation are deducted from it.
After this, a lump sum standard deduction of 30 percent is available on the remaining amount for repairs and maintenance.
Additionally, if the house was purchased with a home loan, a deduction can also be claimed on the interest paid under Section 24(b) of the Income Tax Act. Your tax liability is determined on the amount remaining after all these deductions.
It is mandatory to file a return if the annual income exceeds ₹3 lakh under the new tax regime and ₹2.5 lakh under the old regime.
Deepashree Shetty, a partner at BDO India, explained that the difference between the two regimes is not just the exemption limit.
In the old regime, any loss from house property can be set off against other income, whereas this facility is not available in the new regime.
Therefore, taxpayers should choose a regime only after analyzing their entire financial situation, rather than just looking at the exemption limit.
Selecting the correct form is also very important. If a person's income is from only one property and the total income is less than ₹50 lakh, they should file the ITR-1 (Sahaj) form.
However, if the source of income is two or more properties, they must use the ITR-2 form. The last date to file both these forms is July 31, 2026.
In summary, if you earn rental income, understanding the tax rules and filing your ITR on time can save you from any legal trouble.
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