Every property owner who rents out their home in return for money is considered to be making rental income. And the landlords who are making money through rental income must pay a certain percentage of their earnings towards tax.
According to the Income Tax Act of 1961, the rental income from a house or building is taxable under the head- Income from House and Property. However, if the property owner earns any income from renting out their vacant land or any other type of property, such income will be taxable under – Income from Other Sources.
Any sort of rental income from a house is taxed under the second head of the Income Tax Act, which is Income from House & Property. The tax on rental income is dealt with in sections 22 to 27. The details of these sections are outlined below.
- Section 22: This section explains the taxable income from the house and property. There is a detailed explanation of the property’s annual value as well.
- Section 23: This section highlights how to determine the annual value of the property.
- Section 24: The deduction for income from a house and property is discussed in this section.
- Section 25: This section talks about the expenses or aspects that are not eligible for deduction under the Income from House Property.
- Section 25AA: This section deals with the unrealised rent that is received after 1st April 2001.
- Section 25B: The receiving of rent arrears is discussed in this section.
- Section 26: This section discusses the tax implications of a co-ownership property.
- Section 27: This section discusses the income from the house with deemed ownership.