Owning
property is proud in itself but earning income from that property can make you
proud even more. One can start earning income from the property you own by
giving special consideration to the provisions of Income Tax Act, 1961. There
is a saying as well that “Seasons of life keep changing “. As there are
different seasons of nature in the same manner there are different seasons in
life as well .If you are in autumn season and want to make it spring season, then
you should know how to harvest income from property you own.
Let’s start; Income from property can be derived
from various sources like renting, leasing and appreciation. If you have
sufficient money in your bank account then renting of house property you own
would be better option as compared to selling it off to earn capital gains as
property rates are touching sky these days. Now, once you have decided to rent
your house property either for commercial or residential purposes income is
chargeable under the head “Income from House Property”, even if the assessee is
having business of letting out house property income is chargeable under the
head house property only. Every individual renting house property can claim
deductions admissible as per the provisions like municipal taxes, etc. Also,
provisions of TDS are not applicable when the transaction is between two
individuals. Incase House Property is purchased or constructed on loan then
deduction is allowed even for repayment of loan amount and if there is prior
period interest it is allowed to be deducted in five equal annual installments
.Further, what you can do is take loan jointly like husband & wife, father
& son ,etc . and both of them can claim deduction for interest paid on loan
.Also, even House Property is out of India income is computed in the similar
manner as House Property is in India and rent received shall be converted as
per rate of exchange for conversion of such foreign currency into Indian rupee
shall be the Telegraphic Transfer Buying Rate (TT Buying Rate) of such currency
on the specified date. Even if there is loss it can be setoff and carried
forward as per the provisions of Income tax act. However, there are certain
incomes which are exempted from House property income these are house property
held for charitable purposes, property income of political party, etc.
Second
come to property income from price appreciation and is chargeable under the
head Capital Gains and capital gain can be short term or long term. But in case
of business of sale or purchase of House property income is chargeable under
the head PGBP. If any House property is sold during the year then capital gain
shall be computed as per the applicable provisions. In case of transfer of
House property by resident transferor to transferee (i.e., transferee can be
resident or non-resident) TDS equal 1% of sum paid by any mode, if
consideration is 5Lakh or more. However, main part is of claiming exemption
from capital gains in case of transfer and helps you in lowering taxable
income. If you sell a building owned by you and are being used for residential
purposes and capital gain is LTCG then exemption from capital gain is allowed by
fulfilling conditions prescribed as per the provisions .Case is same, if you
purchase debentures or bonds of NHAI or REC Ltd. by following the prescribed conditions
.Also, if you are owning a building in foreign country and capital gains are
earned from sale of the asset then, taxes are applicable as per Tax Treaty
between the two countries.
Hope after reading this article spring season is
going to come in your life.
Rahul Maggo
Editor at Charteredblood
