Budget 2024 aims to plug a gap in tax regulations concerning rental income from residential properties. The government has amended the Income Tax Act to curb tax avoidance strategies. Previously, some property owners were able to potentially reduce their tax burden by declaring rental income under the “profits and gains from business or profession” category. However, this method was not compliant and allowed them to pay less tax than intended.
To address this disparity, the government has clarified that income generated from renting out residential properties must be solely declared under the designated “income from house property” head. This change will come into effect from April 1, 2025, impacting income reported in the assessment year 2025-26 onwards. Property owners who were previously misclassifying their rental income will need to adjust their tax filing methods accordingly to comply with the new regulation.
This amendment by Budget 2024 signifies the government’s intention to ensure a fairer and more transparent tax system for rental income from residential properties. Property owners need to be aware of this change and adjust their tax filing strategies accordingly to avoid any discrepancies or penalties in the future.
