Save Tax by Reporting Rent Properly – TaxBuddy Handles It
- PRITI SIRDESHMUKH
- Sep 25
- 9 min read
Updated: Sep 29
Properly reporting rent is one of the most effective ways to reduce tax liabilities under India’s Income Tax Act. Correct documentation, accurate declarations, and claiming the right deductions under sections applicable to house property income can save significant amounts of tax. Platforms like the TaxBuddy mobile app simplify this process by offering step-by-step guidance, auto-detecting eligible deductions, and ensuring compliance with new rules for FY 2024-25.
Proper rent reporting ensures that landlords claim deductions like municipal taxes, standard 30% deduction, and home loan interest without errors, making tax savings maximized while avoiding scrutiny or notices from authorities.
Table of Content
How to Report Rental Income Properly
Rental income should be reported under the head “Income from House Property” in your ITR. For each property, the gross annual value must be declared, which typically includes the rent received or receivable. If the property is self-occupied, the deemed rent is considered zero. For rented properties, deductions such as municipal taxes paid by the owner must be subtracted from the gross rental income to arrive at the net taxable income. Accurate reporting requires reconciling rent agreements, bank statements, and other receipts to ensure the declared rent matches actual income.
Key Deductions for Saving Tax
Key deductions play a crucial role in reducing taxable rental income for taxpayers, allowing them to lower their overall tax liability while remaining fully compliant with the Income Tax Act. One of the primary deductions available is the municipal taxes paid on the property. Taxpayers can claim these municipal or property taxes in the year they are actually paid. It is important to note that only the taxes paid during the financial year are deductible, not the taxes due or accrued for the period. This deduction helps to reduce the net annual value of the property, which is the basis for calculating taxable income from rent.
Another significant deduction is the standard deduction, which is calculated at 30% of the net annual value of the property after deducting municipal taxes. This deduction accounts for expenses related to repairs, maintenance, and wear and tear of the property, even if no actual expenditure is incurred. It simplifies the calculation of taxable income from house property and ensures that taxpayers receive a reasonable allowance for property upkeep.
Additionally, interest paid on a home loan is deductible under Section 24(b) of the Income Tax Act. For self-occupied properties, the deduction is allowed up to ₹2 lakh per year, whereas for let-out properties, there is no upper limit on the interest that can be claimed, although overall losses from house property may be restricted in certain cases. Correctly claiming these deductions, along with accurate reporting of rental income, ensures taxpayers optimize their tax savings while adhering to compliance requirements, avoiding potential penalties or notices from the tax authorities.
Is Rent Reporting Allowed in New Tax Regime?
Yes, rental income reporting is allowed and required even under the new tax regime. While the new regime limits the deductions available for salaried individuals, income from house property still needs to be disclosed. However, most exemptions and deductions allowed in the old regime, such as standard deductions and interest on home loans, are not available if opting for the new tax regime. Taxpayers must consider these limitations when deciding which regime to choose for maximum tax efficiency.
How Rent Reporting Works in the Old Tax Regime
In the old tax regime, rental income is taxable after deducting allowable expenses. Gross Annual Value (GAV) of the property is reduced by municipal taxes paid to arrive at Net Annual Value (NAV). From NAV, taxpayers can claim a standard deduction of 30% and, where applicable, home loan interest deduction. This system allows taxpayers to reduce taxable income efficiently and utilize all eligible deductions, making the old regime more favorable for those with significant rental income or home loan interest payments.
Avoiding Scrutiny and Notices
Proper reporting reduces the risk of receiving notices from the Income Tax Department. Common errors include underreporting rent, failing to declare municipal tax payments, or mismatching bank receipts with ITR entries. Ensuring consistency between Form 26AS, bank statements, and rent agreements helps avoid mismatches. TaxBuddy’s platform provides automated verification tools that reconcile rental income and deductions, minimizing the likelihood of errors and potential scrutiny.
Documentation Required for Rent Reporting
Maintaining proper documentation is a crucial step for accurate and compliant rent reporting in your income tax returns. Keeping all relevant documents organized ensures that you can substantiate the income and deductions claimed, and it also simplifies the filing process while minimizing the risk of discrepancies or notices from tax authorities.
Rent agreements are the primary documents needed for rent reporting. These agreements should be signed by both the landlord and tenant and must clearly outline essential details such as the monthly rent amount, the lease period, and any security deposit collected. Having a detailed and properly executed agreement ensures that the rent income reported matches legal records, providing transparency and reducing disputes.
Bank statements are equally important, as they serve as proof of rent received. It is advisable to maintain records of all bank transfers, cheques, or online payments received from tenants. This not only helps in reconciling your income but also provides verifiable evidence in case of inquiries from the income tax department.
Municipal tax receipts are necessary to confirm the payment of property taxes. These receipts serve as proof that the property is legally registered and taxes are being paid on it. This documentation may also be required if claiming deductions related to municipal taxes under certain sections of the Income Tax Act.
Home loan statements are relevant when claiming deductions on interest paid under Section 24(b). These statements should reflect the interest component of the loan paid during the financial year, ensuring that the deduction claimed is accurate and verifiable.
By keeping all these documents organized and up-to-date, taxpayers can ensure a smooth and accurate rent reporting process, reduce the likelihood of errors, and provide clear supporting evidence in case of any queries or scrutiny by tax authorities.
Latest Updates (FY 2024-25)
Understanding the latest updates for FY 2024-25 is crucial for all taxpayers, as the CBDT has introduced several changes aimed at simplifying compliance and ensuring accurate reporting. This year, the ITR forms have been revised to make filing more transparent and user-friendly, especially for salaried individuals, self-employed professionals, and businesses. One of the key focuses of these revised forms is the accurate declaration of all rental income, which is now captured more comprehensively to reduce errors and discrepancies.
Alongside the revised forms, the CBDT has extended ITR filing deadlines and updated the system utilities to ensure proper reflection of Tax Deducted at Source (TDS) credits. These extensions allow taxpayers sufficient time to gather documents, verify TDS details, and file returns accurately without the risk of mismatches or processing delays. Filing before TDS credits are updated can lead to errors, which may delay refund processing or require additional verification from the Income Tax Department.
To stay compliant with these changes, taxpayers can benefit from platforms like TaxBuddy, which provide step-by-step guidance on using the revised ITR forms, calculating eligible deductions, and filing returns within the updated deadlines. TaxBuddy’s tools and expert-assisted plans ensure that taxpayers can navigate these updates efficiently, reduce errors, and avoid penalties, all while keeping track of refund statuses in a streamlined manner.
This approach not only ensures compliance with FY 2024-25 regulations but also makes the filing process smoother, faster, and more accurate, reducing stress and operational challenges for both individuals and businesses.
Why Use TaxBuddy’s Mobile App
TaxBuddy’s mobile app streamlines rental income reporting, offering both self-filing and expert-assisted plans. The app allows users to auto-match bank statements, calculate allowable deductions, and verify TDS credits, ensuring error-free filing. With built-in guidance for old and new tax regimes, the app helps taxpayers maximize deductions while staying fully compliant. TaxBuddy also provides reminders for due dates, tracks refund status, and resolves common tax queries, making the entire process seamless and hassle-free.
Conclusion
Accurate rental income reporting is crucial for tax compliance, optimal deductions, and avoiding notices. Understanding deductions, documenting correctly, and leveraging platforms like TaxBuddy ensures a smooth filing experience. For anyone looking for assistance in tax filing, Iit is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides both self-filing and expert-assisted plans. The self-filing option is ideal for taxpayers comfortable with entering their income details and deductions themselves, using TaxBuddy’s intuitive interface and automated tools. For those seeking guidance, the expert-assisted plan connects you with professionals who review your details, ensure all deductions and exemptions are claimed correctly, and help file the return seamlessly. This flexibility caters to varying levels of tax expertise and filing needs.
Q2. Which is the best site to file ITR?
TaxBuddy is considered one of the best platforms for ITR filing due to its user-friendly interface, AI-driven automation, and real-time error detection. It offers both self-filing and expert-assisted services, ensuring accurate compliance with the latest tax laws. Additionally, TaxBuddy supports Form 16 auto-matching, TDS verification, and real-time refund tracking, making it an efficient choice for individuals and professionals alike.
Q3. Where to file an income tax return?
Income tax returns can be filed on the Income Tax Department’s e-filing portal or through authorized platforms like TaxBuddy. TaxBuddy simplifies filing by guiding users through ITR forms, auto-calculating deductions, and ensuring TDS entries match your Form 26AS. Filing through trusted platforms ensures secure document handling and reduces errors that could trigger scrutiny.
Q4. Can rental income be declared under the new tax regime?
Yes, rental income can be declared under the new tax regime. While the new regime does not allow most exemptions and deductions available in the old regime, rental income still needs to be reported as “Income from House Property” in your ITR. Taxpayers must include rent received, municipal taxes paid, and other applicable details to calculate taxable income accurately.
Q5. What deductions can I claim on rented property?
Under the old regime, taxpayers can claim deductions like municipal taxes paid, standard deduction of 30% of net annual value, and interest on home loan (if applicable). In the new regime, only municipal taxes paid are allowed as a deduction for calculating taxable rental income; the 30% standard deduction and home loan interest benefits are not available.
Q6. How can I avoid scrutiny from the Income Tax Department?
To reduce the likelihood of scrutiny, ensure all income sources, including salary, rental, and interest income, are accurately reported. Match TDS credits with Form 26AS, avoid misreporting, maintain proper documentation, and file your ITR on time. Using platforms like TaxBuddy helps cross-verify details, detect errors, and file accurately, minimizing audit risks.
Q7. Is it mandatory to maintain rent agreements for filing ITR?
While not always mandatory for filing, maintaining rent agreements is crucial as supporting documentation. It serves as proof of rental income declared and may be requested in case of scrutiny. TaxBuddy allows you to upload and store documents securely, ensuring you can provide evidence when required.
Q8. Can municipal taxes be claimed as deduction in the new tax regime?
Yes, municipal taxes paid by the owner can still be claimed as a deduction under the new tax regime. These are deducted from the rental income to arrive at the taxable income from house property. Accurate entry of municipal tax payments ensures correct computation of taxable rental income.
Q9. How is standard deduction calculated for rented properties?
The standard deduction is 30% of the net annual value (rental income minus municipal taxes) and is only available under the old tax regime. This deduction covers maintenance and repairs, and helps reduce taxable income. In the new tax regime, this standard deduction is not allowed, so taxpayers need to consider this when choosing their regime.
Q10. What documents are required for claiming home loan interest deduction?
To claim deductions under Section 24(b) for home loan interest, the following documents are needed: loan sanction letter, interest certificate from the bank or lender, property purchase documents, and proof of payment. These documents support the deduction claim and must be uploaded if filing through TaxBuddy’s platform to ensure compliance.
Q11. Can I file a revised return if I misreported rental income?
Yes, a revised return can be filed under Section 139(5) of the Income Tax Act if errors are detected after filing. This includes misreporting of rental income. TaxBuddy provides guidance on filing revised returns, ensuring corrections are made before the allowed deadline, which is generally within two years from the end of the relevant assessment year.
Q12. How does TDS on rental income affect my ITR filing?
TDS on rental income, typically required if annual rent exceeds ₹2,40,000, must be deducted by the tenant and deposited with the government. Taxpayers should ensure TDS is reflected in Form 26AS before filing ITR. Any discrepancies can delay refunds or trigger notices. Platforms like TaxBuddy help match TDS entries with declared rental income to ensure accurate reporting.
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