More Tax Concessions On Rental Income Will Help Realise 'Housing For All' Dream

Taxpayers are eagerly waiting for some concessions in the Union budget 2017. The real estate market that has been reeling under a highly suppressed environment in the year that went by, too, is hoping of some sops which can help individual taxpayers forgo less money in the form of taxes. In the lull property market, it's the right time for the government to encourage people to buy houses. This can be done if the government gives some tax concessions to property owners to buy and lease out their properties. Because more houses in the market will bring down rental rates and make housing more affordable. 

 

 

Rental income is determined based on the rent received after deductions like municipal taxes paid in the year, a standard deduction of 30 per cent from the net annual value after deducting the property's municipal taxes and the interest paid to banks on the borrowed capital to buy the property.

 

 

Ranjana Rai, who works as a chartered accountant in a company in Delhi, says: "A person has to forgo a large amount in the form of income tax if he owns two houses but has not taken any home loan. For instance, if you own a property and rent it out, the income that you earn will be taxed as income from house property under Section 22 of the Income-Tax Act." The Act gives you a deduction for taxable income from house property. "The entire rental income is not considered for taxation — only 70 per cent is considered while the rest 30 per cent deduction is allowed towards the maintenance of the property," she said.

 

The government should bring in a law where less amount of rental income is taxed in order to encourage people to invest their money in the residential market so that more and more people are encouraged to buy and then lease out their houses. 

 

This is the reason why the interest from the home loan on the second house is not taxable. 

 

 

The Income Tax Act, 1961, states that if you have two houses and only one is self-occupied and the other is kept vacant, it would deemed to have been let-out and the property owner will have to pay tax on it. 

 

The agenda here for the government is that if one owns more than one house, then it should be put on rent so that more and more people have a roof over their heads. 

 

The move of the central government to give an additional deduction of Rs 50,000 to first-time home buyers on interest on home loan taken for residential property in Union budget 2016 was a step in the right direction and is on lines of the government's agenda to provide 'housing for all' but is not enough. In times when property prices are going through the roof, a meagre Rs 2.5 lakh rebate is not enough. To push its agenda, the government should make it tax-free.