Finance Minister Nirmala Sitharaman made a big announcement for the middle class in Budget 2024. Along with changing the income tax slab, Finance Minister Nirmala Sitharaman gave the benefit of standard deduction. She has increased the standard deduction from Rs 50,000 to Rs 75,000. At the same time, the Long Term Capital Gain Tax (LTCG) for listed and non-listed assets has been changed to 12.5 percent. Apart from this, a big change has also been made regarding the income from rent.
It has been said in the budget that if there is income from rent, then it will have to be declared as rental income from housing property. Earlier it could be shown as business or professional income. In the budget presented on July 23, Finance Minister Nirmala Sitharaman had said that rental income from residential property to individual taxpayers will now come under ‘Income from House Property’.
This means that rental income will no longer be considered as income from business and profession. Finance Minister Nirmala Sitharaman said in her budget speech that there is a proposal to amend the Income Tax Act for this. Currently, taxpayers could claim deduction for many business-related expenses under ‘Profits and Gains of Business or Profession’. This would reduce their taxable income.
Will have to pay more income tax
Under the new provision, rental income cannot be shown as business income. Due to which the landlord will be able to reduce the deduction claim on maintenance cost, repairs and even depreciation. This will increase their taxable income, which they will have to find some other option to reduce.
According to the new rule, if the income from house is shown under ‘Income From House Property’ then the deduction will be limited. Only under maintenance cost and repairs, standard deduction up to 30 percent can be shown.
When will the new rule be implemented?
Finance Minister Nirmala Sitharaman said that the new rule for showing income from house property will be effective from April 1, 2025 i.e. next year. The government will amend section 28 of the Income Tax Act for this. After this amendment, if a landlord earns more from rent, then he can consider some other option to reduce taxable income.