Income from a house or property: All you need to know
In order to generate income from a property, you first need to buy one. Take a low-interest Home Loan from a company like Bajaj Finserv, and then decide how you’d like to make money with your property.
Here are a few different ways to earn a sizeable income through your home.
Rent Out Your House
If you own a vacant space, renting it out is a great idea! You’ll not only give yourself additional income from a let out property but will also be satisfied to know that it’s not just sitting there collecting dust. In order to improve your chances of getting a good tenant, you may want to renovate some portions of the property. This may seem counter-intuitive in terms of finance, but it will help you make money in the long run. Such steps can add value to your space, making it appealing to potential clients such as families and students.
Remember that changing tenants can lead to different expenditures that could include repair work, painting and advertising. First, try finding a reliable tenant and then try your best to keep them happy. However, remember that you have both signed a contract, and must follow those terms and conditions. Be a good landlord, but remember that this is business. Make it clear from the very beginning that late payments or damage to your property would not be accepted.
Income from Shops and Offices
You also have the option to rent out your property to a company. In this case, your house will likely be converted into an office space. Many multinational companies, as well as start-ups, are rapidly opening branches across the country and hence, are actively looking for property to rent.
You may also want to let out your space to cafes and restaurants. Rental income from a shop or company is a very lucrative option. Not only do they pay high commercial rent, but they also pay regularly.
Another way to make money is to generate income from a self-occupied property. An SOP is a property occupied by the owner for residential purposes. If it is not your place of residence, then it doesn’t qualify as an SOP. There is one exception to this rule—if you own a house in one city but are now living on rent in another city because of work, the property you own will be considered an SOP. You can claim tax exemptions for your House Rent Allowance, and if you’ve taken a home loan for the property, you’re also eligible to claim a tax deduction under Section 24 (b).
Be Tax Efficient
No matter which path you choose, it is critical to be highly tax efficient. You need to fully understand how you can maximize your capital growth while following all the rules and regulations stated by law. The Income from House Property section of the IT Act focuses solely on income chargeable to tax under the head ‘house property’. You should know that even if you have a vacant residential or commercial property, you’ll have to pay a tax on its rental value whether you’re getting any rent from it or not.
In case of a rented property, if a tenant has missed one or more rental payments, the owner has to file income tax for those payments in the year of the receipt. The legal term for the missing amount is arrears. Tax treatment of arrears of rent falls under section 25B of the Income Tax Act.
Additionally, all incomes are taxable in the name of the owner or deemed owner of the property. The owner is the person who receives the income from a particular property. A deemed owner is an individual who may have gifted a property to a family member. In this case, even if the family member is the legal owner, the deemed owner will be liable to pay tax.
Get Professional Help
It is best to get professional help from an established financial institution like Bajaj Finserv. Unless you have a degree in law, it’s going to be very difficult to understand all the financial and legal details. When you partner with companies like Bajaj Finserv, you can be assured that seasoned experts are planning your finances for you, and making sure that you maximise your profits.