Budget 2024: Rent has to be declared under 'income from house property' tax head

Nirmala Sitharaman said some taxpayers were reporting their rental income under the wrong income tax head, thus reducing their tax liability.

Finance Minister Nirmala Sitharaman proposed in the Union Budget that income from letting out a house or part of the house by the owner would have to be declared as income from house property while filing income tax.

Union Finance Minister Nirmala Sitharaman during the post-budget Press Conference at National Media Centre, New Delhi. (PTI)

Nirmala Sitharaman said some taxpayers were reporting their rental income under the wrong income tax head, profits and gains of business or profession, thereby reducing their tax liability.

"It has been observed that some taxpayers are reporting their rental income generated by letting out of the house property, under the head ‘Profits and gains of business or profession’ in place of the head ‘Income from house property’. Accordingly, they are reducing their tax liability substantially by showing house property income under the wrong head of income," she said.

She proposed that the Centre would amend section 28 to clarify that any income rental income through the taxpayer's house shall not be chargeable under the "profits and gains for business or profession" head.

The new rule is likely to increase the tax liability of such people.

"In view of the same, it is proposed to amend section 28 of the Act to clarify that any income from letting out of a residential house or a part of the house by the owner shall not be chargeable under the head ‘Profits and gains of business or profession’ and shall be chargeable under the head 'Income from house property," she said.

She added that the amendment will take effect from the next financial year.

Regarding TDS (tax deducted at source) on the sale of immovable property, she clarified that "where there is more than one transferor or transferee in respect of an immovable property, then such consideration for transfer of the immovable property shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property".

Sitharaman also proposed amendments to the Prohibition of Benami Property Transactions Act, of 1988.

"It is proposed to provide immunity from penalty and prosecution to benamidar on full and true disclosure. It is also proposed to rationalize time limits for attachment of property and reference to adjudicating authority," she said.

With inputs from PTI