The important provision in the budget for the people who earn by renting out the house (Rental House Income) is that now the income earned by renting out the house or flat will have to be declared as income from housing property while filing income tax (Income Tax Payers). Now it cannot be shown as business income.

While presenting the budget, Finance Minister Nirmala Sitharaman mentioned an important amendment in the Income Tax Act. In which it was clarified that the income earned from renting out residential property should be shown under “Income from house property” instead of income from business or any profession.

Also Read: Fastag New Rules: One mistake and you will have to pay double toll, NHAI issued guidelines

Now you will not be able to save tax by showing wrong income

Currently, taxpayers show their rented house income as profit from business or profession in a wrong manner to reduce it. The Finance Minister had said that due to this their liability is getting reduced. This provision allows some property owners to show rent income as business income, so that deductions like maintenance cost, repairs and depreciation can be claimed. By misrepresenting the income in this manner, taxpayers reduce their taxable income significantly. Due to which they have to pay less tax.

Income from house is no longer business income

In her budget speech, Finance Minister Nirmala Sitharaman proposed that the central government will amend Section 28 to clear this situation. After which taxpayers will not be able to show income from rent as business income. Business or profession and house property will be payable under the income head. This new rule is likely to increase the tax liability of such people. The Finance Minister said that this amendment will be effective from April 1, 2025, next financial year. This new rule will prevent income tax payers from paying less tax in the name of wrong income.

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If you work, you definitely get House Rent Allowance (HRA). This is an important part of the salary. This helps in saving tax. However, for this it is necessary to pay rent. But, how can you avail the benefit of House Rent Allowance without living on rent? How can it be claimed? To understand this, the entire process has to be understood.

How to get the benefit of HRA?

House Rent Allowance is a major part of the salary. It plays an important role in saving tax. However, there is a limit regarding House Rent Allowance (HRA) and there are some important conditions as well. Tax benefit is available on HRA under Section 10 (13A) of the Income Tax Act. HRA comes under the purview of tax exemption. Before calculating Gross Taxable Income, this part is subtracted from your total income.

This is also how you get the benefit of HRA

Self-employed people do not get this benefit. Even if you live in your home, you cannot take advantage of this. To avail the benefit of HRA, it is necessary that you live in a rented house. Suppose you work in Delhi-NCR and have to commute from your home to office, then will you get the benefit of HRA? This is an important question.

You can avail benefits without living on rent

If you do not live on rent but live with your parents or a relative and have to commute to office from there, you can still avail the benefit of HRA. According to tax experts, if the house is in the name of any of your relatives like parents, then you can avail tax exemption on it. For tax exemption, parents will have to pay rent. For this, rent agreement and rent receipt will be required.

However, the total amount of rent will have to be shown as the income of the parents. If he comes under the tax net, then the rent amount will be added to his total income and he will have to pay tax on it. If they do not have any income then this will also be a source of income for them. In this way double benefit can be availed. The condition is that the house should not be in the name of the taxpayer.

How is the calculation done?

There are 3 conditions regarding HRA.

This will be 40/50 percent of your basic salary. The limit is 50 percent for metro cities (Delhi, Mumbai, Kolkata and Chennai) and 40 percent for non-metro cities.

How much HRA is the company giving you?

How much rent have you actually deposited – minus 10 percent of basic salary.

Dearness Allowance is also included in the calculation along with the basic salary, if you are getting the benefit of DA. The benefit of tax exemption will be available on the minimum amount that is fulfilled under the above three conditions

7th Pay Commission DA Hike: Good news on dearness allowance! Next time also it will increase by 4%, know by which formula…

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In this scheme, depositors get bumper interest up to 7.5 percent. Apart from this, it also helps in saving tax. Broadly speaking, if you deposit Rs 2 lakh lump sum in this scheme, then you will get around Rs 90 thousand as interest. Apart from this, the principal amount of 2 lakh will also be returned on completion of time. Let us give complete information about this scheme.

Maturity is of 1-5 years

According to the information available on India Post’s website, Post Office Time Deposit Account can be opened for 4 different tenures. Interest rate is 6.8% for 1 year, 6.9% for 2 years, 7% for 3 years and 7.5% for 5 years. Interest is paid annually and calculated quarterly. A minimum investment of Rs 1000 can be made. Beyond that, investments can be made in multiples of Rs.100.

90 thousand will be given only as interest

According to the Post Office Time Deposit Calculator, if an investor deposits Rs 2 lakh in this scheme for 5 years, then he will get a total of Rs 89990 as interest. On completion of the period of five years, he will also get back the principal amount of Rs 2 lakh.

Tax benefit is available on time deposit of 5 years

If the Post Office Time Deposit account is opened for 5 years, then tax benefit is also available on it. Deduction can be availed under section 80C on the investment amount. Talking about other features of this scheme, it can be opened single or joint. Pre-mature closure is possible only after at least 6 months if the investment is made once.

Investors can open any number of accounts

If an investor wants to extend the Post Office Time Deposit account, then after maturity, he can extend it for the same time period. An investor can open any number of accounts in his name. One important thing is that even if you do not withdraw the interest amount received on annual basis, it will remain in the account like dead money. There is no separate interest on this.

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But apart from these, there are many such sections in the Income Tax Act, through which you can save tax on your income. Let’s know about it from CA Rahul Kumar Agarwal.

First know section 80C
First of all, we will talk about section 80C. In this matter, Rahul says that most of the people think that income up to Rs 5 lakh is tax free, which is not correct. In fact, income up to 2.5 lakhs comes under the ambit of tax exemption. After this, for the next Rs 2.5 lakh, a rebate of up to Rs 12,500 is available under section 87A. In this way, the benefit of tax exemption is available on the total salary of 5 lakhs. Apart from this, under section 80C, tax exemption can be availed on investments up to Rs 1.50 lakh in schemes like term insurance, 5-year FD, senior citizen savings schemes and ELSS mutual funds.

Section 80CCD

If you invest money in the National Pension Scheme, you can claim tax exemption under section 80CCD. You get tax exemption on Tier 1 account in NPS. Under NPS, under Section 80CCD (1B) of the Income Tax Act, tax exemption can be availed on investments up to Rs 50,000. NPS can also help you in extra tax savings if you have met the limit of up to Rs 1.5 lakh under section 80C.

Section 80D
You can save tax on your income by taking health insurance premium for the health of yourself, family and dependent parents. If your age is less than 60 years, then you can get a rebate of up to Rs 25,000 by paying premium for yourself, life partner and children under this section. Those whose age is more than 60 years, they can claim deduction of up to 50 thousand rupees under section 80D. On the other hand, if both the taxpayer and his parents are above 60 years of age, then a deduction of up to Rs 1 lakh can be claimed.

Section 80DDB

If a dependent person in your family is suffering from a serious illness, then the amount spent on his illness is also tax exempt. All diseases like cancer, hemophilia, thalassemia and AIDS have been included in this list. Under section 80DDB, you can take this deduction on the expenses incurred for the treatment of parents, spouse, children or dependent siblings. But you must have a medical certificate. According to age and other conditions, this deduction can be from 40 thousand to 1 lakh.

Section 80EE
If your home loan is less than Rs 35 lakh and the value of your property does not exceed Rs 50 lakh, then under section 80EE you can claim an additional deduction of Rs 50,000 (Section 24) on home loan EMI interest. But the condition is that no other property should be registered in his name at the time of loan approval.

Section 80EEA
If you have taken a home loan, you can claim an additional tax deduction of Rs 1.5 lakh on home loan interest under section 80EEA. But the condition is that the stamp value of the house should not exceed Rs 45 lakh. Apart from this, the home loan must have been taken between April 1, 2019 and March 31, 2022. If you have bought a house in metro cities, then the carpet area for it should not be more than 60 square meters, for other cities this limit may be different.

Section 80E
If you have taken a loan for higher education of yourself, life partner or child, then you can claim tax exemption on the interest earned on this loan. But the condition is that it is taken from a recognized institution or bank. This exemption can be available for the immediately coming assessment year and up to 7 assessment years thereafter.

Section 80GG
Salaried people who live in a rented house can reduce their tax burden through house rent allowance. 60,000 annually under section 80GG. (Rs. 5,000 per month) is the maximum exemption allowed.

Section 80TTB
Under Section 80TTB, tax exemption can be taken on earning a maximum of Rs 50,000 annually on the interest earned from deposits. This section is available for senior citizens from 1st April 2018. However, under Section 80TTA, the deduction of up to Rs 10,000 on the interest earned from savings account is not available to senior citizens.

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