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GST on Rental Income

Currently India is going through a lot of changes after the implementation of GST. Government vowed that the new GST (Goods and Service Tax) will change the whole economy and the service sector will be effected more compare to the manufacturing industry. GST has also structured the approach to collect taxes from various sectors.

In this article we will particularly discuss the impact of GST on rental income.

Under GST, the Schedule 2 of the GST Act states that

renting GST is applicable only on certain types of rent such as; if the property if given on rent, lease or licensed to occupy or in case if a property is leased out include a commercial, industrial or residential property for business.

Contents

Under Service Tax Regime

Before GST came into being, the landlord were required to obtain a service tax registration, in case of his total taxable service is limited to Rs. 10 lakhs per year. In case from all the properties you have rented does not exceed Rs. 10 lakhs per year, the land does not require to obtain a service tax registration.

GST on Rental Income

Under GST Regime

Under GST regime, in case if you rent out a residential property for residential purpose, it is exempted from GST. In case if you rent out or lease out an immovable property for business would fall under the tax bracket of 18%, as it would be considered as a supply of service.

After GST came into being, the limit for applicability of GST has been increased to Rs. 20 lakh from Rs. 10 lakh. This makes the landlords who were earlier covered under Service tax regime would be kept outside the indirect tax bracket.

Who is required to register when renting out property business?

If you are a tax payer who is earning more than the exempted threshold i.e. Rs. 20 lakh is required to register under GST and pay taxes.

How GST is calculated when you rent out a property for commercial purposes?

In case you are renting out a property for commercial purposes, GST will be applicable at 18% tax bracket on the taxable value rent would be treated as a taxable supply of service.

In case of a registered charitable trust or a religious trust which is meant for public use, it is exempted from GST only in case of:

  • In case the renting rooms are charged Rs. 1,000 or less per day
  • In case they are renting shops and other spaces for business purpose and are charging Rs. 10,000 or less per month
  • In case they rent community halls or an open area and are charging Rs. 10,000 or less per day

What is the impact of GST and TDS on rental income?

Under the income tax law, in real estate investment, the rental income is taxed under ‘Income from House Property’, and it is a direct tax law of the country. Also, let out properties are subject to indirect taxation.


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