If you happen to be among the fortunate but less numbered of people, who own an additional house that can be given out for rent, then you also need to be clear about the tax advantages that it can fetch you. Why give tax when you can actually save that amount and re-invest in something else of your choice? There are a few tax exemptions that this income from monthly rent is subjected to and can be turned to your advantage.
For starters, the renting out of property is considered to be on par with any other sort of business, which means that the income received from this business can also be subjected to certain deductions.
To effectively utilize these tax sops, there has to be a strategy involved which will give you the maximum benefit. First, you need to free your rest of investments from the value of the property. For this, you need to park this additional fund in market instruments which shall appreciate, thereby giving the property value insulation against market fluctuations. Then, as mentioned earlier, there is the exemption for loan repayments, both capital and interest components. Also, like in any other business proposition, all costs associated with effective and smooth running of this business are subjected to certain deductions, thereby reducing the overall tax liability.
A few deductions that come into the calculations are:
1. Any interest paid out for mortgage of property is subject to deduction from total income.
2. Money spent on maintaining the property and premises is also reduced from total income. These may include landscaping expenses, insurance costs on property, cleaning charges, any other maintenance activity which may be required from time to time.
3. Depreciation charges on property are taken into consideration while evaluating losses from property.
4. Costs incurred for travel to rented property for attending to tenants' complaints or any such issues are also deducted from total income.
5. Any casualties due to accidents caused and costs incurred for rectification of the same.
6. Insurance paid out on property.
7. Expenses towards legal charges, fees for real estate brokers etc... are also exempted.
There are very many reasons why government has introduced so many tax sops for rental properties. In its own small way, these deductions encourage citizens to buy additional property and give out for rent, thereby boosting the infrastructure business. One of the most important things that landlords have to keep in mind to reap these benefits are that all accounting data related to rented property has to be kept separate and filed with IRS by dates as stipulated. This will ensure that tax deductions are effected without any delay or error and the landlord gets all the benefits associated with these rules. It is only natural that these rules and regulations should be utilized for everyone's advantage and such sops be used to create long term benefits for all.
Ravisankar_Poduval
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