- Annual Value: The term ‘Annual Value’ refers to the amount that the property can fetch in a year by letting it out on the rent. In other words, it is a notional rent amount that the property owner could have earned if the property had been rented.
- Municipal Value: Municipal authorities are in charge of determining the municipal value of a property and collecting municipal taxes on it. The municipal tax is levied on the yearly renting value of a property, which is calculated after several factors are taken into account.
- Fair Rental Value: It refers to the rent that a property of comparable size and amenities in the same location as yours would fetch.
- Standard Rent: The term “standard rent” refers to the rent established by the Rent Control Act. The purpose of standard rent is to protect the rights of both tenants and property owners.
- Actual Rent Received: Actual rent refers to the amount that the tenant pays out to the property owner every month or so. Depending upon the agreement, the rent cost may include utility bills, furniture expenses (furnished housing), and so on.
- Deductions: Deduction in the context of the Income Tax Act refers to certain spendings that you can deduct from your total taxable rental income. Under Section 24 of the Income Tax Act, you are allowed to make two deductions.
Takeaway
Renting out of property means unavoidable tax implications. Property owners who make their living solely from rental income should be aware of all the tax deductions and options available to them for lowering their rental income taxes. To understand the tax on rental income thoroughly, don’t forget to refer to the glossaries mentioned in the article.
