Home > Income Tax > Help Center > Rental IncomeLast Updated: Jan 22nd 2023

When to consider rental income as business income?

Investments in real estate have increased in recent years. It is common for NRIs and the wealthy to own multiple homes these days. The question now is, how will this income be treated? Is it business or house property income? more on when to consider, benefits, risks, and the tax treatment.

Tax Advisory from EZTax.in


Background

Now a days, increase in real estate market is attracting every person attention. Investment in real estate can be either in land, residential or commercial properties. The income from real estate can be generated in the form of rent, lease, or sale of asset.

When to consider rent under Business Income ?

Generally, if the property is let out, the taxpayer will get the rental income every month. Generally, the income generated from house property needs to be shown under the head "1. Income from House Property".

But at times, if the intent of the rental property is for commercial use, one need to be shown under "2. Income from Business".

Tax treatment ?

1. Income from House Property

If the rental income is considered under income from house property, the taxpayer will get 30% standard deduction towards repairs and maintenance.

2. Income from Business

2.1 Generally, the annual value of the property will be considered under the head 'profits and losses' from business / profession if

  1. Portions of property occupied by the taxpayer for the purpose of any business carried on by him.
  2. Properties of the taxpayer engaged in the business of letting out of properties.

2.2 If the rental income is considered as business, the taxpayer can claim the actual expenses with respect to repairs, maintenance, depreciation, interest etc

2.3 The taxpayer's intention to show as business and the documentation (eg., MOA, Firm's objective statement, Self declaration*) is mandatory to show as business.

ADVISORY NOTE:
If the taxpayer shows the rental income under the head business, there will be loss of revenue to Government as the taxpayers will claim more expenses. Hence the chances of scrutiny will be higher if the rental income is shown under business / profession.

Our Tax Services

Online Income Tax Filing Time: ~7 mins
  • Comprehensive & Accurate > No limits.
  • Highly Secure > Peace of mind.
  • Maximum Deductions > Save on Taxes.
  • No more visits to Tax Consultants > Save Time & Money.
  • Real-time Tax Calculation
  • Available in both Web Browser & Mobile App

Start Now

GST Accounting Software Price: FREE for 1st year in India  refer pricing for other countries such as India, Australia, Malaysia, Nepal, Pakistan, Singapore, Sri Lanka, & UK

Easiest GST ready Accounting software

  • GST Compliant Invoicing
  • Online - Highly available
  • Quick Onboarding - Import your data from legacy
  • Personalization - Highly customized Invoicing
  • Drafts > Estimates > POs > Delivery Challans > Invoices > CR/DR Notes > RCs & All.
  • Barcode scanner Integration
  • Amazon, Flipkart Imports
  • Individual, or Bulk Payments - just a Click away
  • Multiple users can Book / Bill at the same time
  • Quick Invoicing, Auto Delivery, & Reminders
  • Multi-Channel GST returns preparation
  • Customized for Regular and Composition
  • AI Data Insights
  • AI Prioritization
  • AI Alerts
  • Expenses & Purchases
  • Real Time P & L
  • Barcode Scanner, e-Way Bill Integration
  • Excellent User Experience
  • Easy to understand language
  • Artificial Intelligence enablement
  • above all, Count on our Outstanding Client Service

Start NowLearn more
Tax Expert Services Price: Rs.599 onwards

GST
  • Affordable Tax Services for Businesses, Associations, Individuals
  • GST Registration
  • GST Return Filing
  • GST Accounting
  • GST Consultation
  • Notice Handling
Income Tax
  • Income Tax Return Filing for Businesses, Associations, Individuals
  • Tax Savings
  • TDS Preparation
  • General Tax Compliance
  • Investment Advisory
  • Capital Gains Consultation
  • Tax Planning
  • Notice Handling
Virtual Accounting
  • Complete Accounting for Businesses, Associations, Individuals
  • Compliance & Accounting Portal Access for easy monitoring
  • Accounting Advisory
  • Tax Savings
  • GST, Income Tax, TDS, General Tax Compliance
  • Business Planning

Contact Now   WhatsApp Now


How to get help from EZTax.in