ITR Filing for 2025: Save on Income Tax From Rental Income

Explore Exemptions and Deductions You Can Claim

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ITR Filing 2025: Maximizing Tax Savings on Rental Income

As the deadline for Income Tax Return (ITR) filing approaches in 2025, landlords and property owners should be aware of the various exemptions and deductions available to them. Properly understanding these can help significantly reduce your taxable income and optimize your tax liabilities.

Understanding Rental Income

Rental income, derived from properties that you own and lease out, is considered taxable under the Income Tax Act. This income must be reported when filing your ITR. However, there are several provisions that allow property owners to claim deductions, thus lowering their tax burden.

Exemptions and Deductions to Consider

Here are key exemptions and deductions that you can claim against your rental income:

1. Standard Deduction

Landlords can claim a standard deduction of 30% on their net rental income. This deduction accounts for expenses related to the maintenance and operation of the property, such as repairs, property management fees, and other incidental costs.

2. Municipal Taxes

Any municipal taxes paid on the property are deductible from the rental income. Keep records of these payments, as they will help reduce your taxable income.

3. Home Loan Interest

If you have taken out a loan to purchase the property, the interest paid on this home loan can also be claimed as a deduction. Under Section 24(b) of the Income Tax Act, you can claim a deduction of up to ₹2 lakh annually on the interest paid on home loans for self-occupied properties. For let-out properties, there is no upper limit on the amount of interest that can be claimed.

4. Depreciation on Property

Property owners can claim depreciation on the building, which can further lower taxable income. The depreciation rate for residential buildings is typically 5% per annum. This is a non-cash expense, meaning it does not involve an actual cash outflow, thereby effectively reducing your taxable income.

5. Repairs and Maintenance Costs

Expenses incurred for repairs and maintenance of the property can also be claimed as deductions. This includes costs for plumbing, electrical work, and general upkeep that are necessary to maintain the property’s value.

6. Other Allowable Deductions

Other expenses, such as insurance premiums, legal fees incurred for property-related issues, and advertising costs for finding tenants, can also be included as deductions against rental income.

Planning for Tax Benefits

To effectively plan for tax benefits, it is essential to maintain meticulous records of all income and expenses related to the property. This includes rent agreements, receipts for repairs, and any documentation related to home loan payments. Using accounting software or consulting with a tax professional can streamline this process and ensure compliance with tax regulations.

Conclusion

Filing your ITR as a property owner in 2025 doesn’t have to be daunting. By taking advantage of the exemptions and deductions available, you can significantly reduce your tax liability on rental income. Planning ahead and understanding the provisions of the Income Tax Act will not only help you save money but also ensure that you are compliant with the law.

As tax laws may change, it’s advisable to stay updated or consult a tax expert for the most current information and personalized advice tailored to your financial situation.

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