Now you can’t declare house rental income as business income to save tax: Budget 2024 plugs tax avoidance loophole You have to mandatorily declare it under the house property heads of income. The loophole to save income tax from rental income of house property has been plugged in by the government in Budget 2024
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No more reopening, re-assessment of old ITR beyond 3 years if escaped income is below Rs 50 lakhIndexation benefit on sale of property removed; new LTCG rate of 12.5% announced for capital gains on sale of propertyBudget 2024 has plugged a loophole wherein taxpayers could declare rental income from letting out of a house property under profits and gains from business and profession heads of income. Now a rental income from letting out of a residential house property can be offered for tax under only income from house property head of income.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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“The government has plugged the misuse of claiming excessive deductions against rental income from letting out of residential house property by clarifying that income from such residential house property shall not be chargeable under the head-Profits and gains of business and profession (PGBP),” says Shalini Jain, Tax Partner, People Advisory Services, EY India.
So now you can claim only the specified deductions under the house property heads of income. As a direct result of this, now your tax payable from rental income of let out house property will increase if you previously were declaring house property rental income under the PGBP heads of income.
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More NewsReporting of income from letting out of house property under ‘Income from House Property’
Section 28 of the Act specifies kinds of income that shall be chargeable to income-tax under the head ‘Profits and gains of business or profession’.MORE STORIES FOR YOU✕« Back to recommendation storiesI don't want to see these stories becauseThey are not relevant to meThey disrupt the reading flowOthersSUBMITAlso read - No more reopening, re-assessment of old ITR beyond 3 years if escaped income is below Rs 50 lakh
"It has been observed that some taxpayers are reporting their rental income generated by letting out of the house property, under the head ‘Profits and gains of business or profession’ in place of the head ‘Income from house property’. Accordingly, they are reducing their tax liability substantially by showing house property income under the wrong head of income. In view of the same, it is proposed to amend the section 28 of the Act so as to clarify that any income from letting out of a residential house or a part of the house by the owner shall not be chargeable under the head “Profits and gains of business or profession” and shall be chargeable under the head “Income from house
Property. This amendment will take effect from the 1st day of April, 2025 and will, accordingly, apply in relation to assessment year 2025-26 and subsequent assessment years," as per the Memorandum to Union Budget 2024.
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This story originally appeared on: India Times - Author:Faqs of Insurances
