GST and TDS: How will it impact the Rental Income?

GST and TDS: How will it impact the Rental Income?

For a few years now, rented properties have been subjected to service taxes under specific conditions. Rental income that comes from real estate devel

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For a few years now, rented properties have been subjected to service taxes under specific conditions. Rental income that comes from real estate development in Hyderabad was previously being taxed under the ‘Income from House property’ head under the Indian Income Tax laws.

But with the introduction of GST and TDS tax policies, collecting these taxes from different sectors have become notably convenient in BBG India. An example of such a sector that has become a constant source of revenue for over a few years now, is rent. If you are currently staying in a rental home then you need to know about these taxes. Both GST and TDS will greatly impact people living in rented houses. 

What is GST?

GST stands for Goods and Service Tax and it is an Indirect Tax that has replaced certain other taxes in India. This Indian Tax law is a pretty comprehensive one and this destination-based tax is usually levied on each value addition. Therefore GST is levied upon the various supplies of services and goods and it replaces all other indirect taxes in BBG India

What is TDS?

TDS is a direct tax and it stands for Tax that is Deducted at Source. According to the Income Tax Act, whenever a company or a person makes a payment, a certain amount of money is deducted at the source, if the amount surpasses determined threshold limits. TDS is usually subtracted at definite rates, as designated by the income tax department. 

Taxes levied on Rentals

It is a piece of common knowledge to all the people that recently every real estate development in Hyderabad has several tax laws to deal with. Nevertheless, for each property that has been kept aside for rental purposes, there are specific indirect tax-related laws as well, like TDS, service tax and the recently proposed GST which is also imposed on them. These new taxes have made quite a mark for themselves.

In the current economy, when a person owns property meant for rental purposes, he/she is bound to enroll himself/herself for the service tax. But this situation only happens when the total rental revenue and other related incomes go up to a total of ten lakh rupees per year or even more. However residential lands that are only used for private and residential purposes are spared from this new tax law.

How will GST and TDS Make an Impact on Rental Income?

Due to the implementation of GST, there has been a tremendous change in the prevailing service tax method. For instance, after the implementation of GST, the upper limit for rental income was increased from Ten Lakh Rupees to Twenty Lakh Rupees. This took place because of the addition of goods which were earlier spared from services charges. 

Now that GST has been implemented in full gear, the Reverse Charge Mechanism of different service taxes has also been modified. In this particular scenario, a normal GST registered consumer is bound to pay GST when an approved dealer is unregistered. 

When commercial spaces, stores, community halls or public spaces are rented, the GST applicable will be 18% of the rental income. But in the case of a charitable trust owned and managed by a religious body, used by common people, will be exempted from GST. 

When the rent of any property goes beyond the limit of 1.8 lakhs per year, then it is subjected to a 10% TDS tax from the lessee. However, this limit is only applicable to the owner of the land and not his land. TDS taxes are applicable to both commercials as well as residential properties. When a Landlord puts up any plot for rent, he is basically making his pocket heavy under the TDS tax regime. If you have a property of your own and want to put it up for then, then even you can enjoy this tax benefit. 

Thus it is very important to keep in mind the various tax regulations related to GST and TDS because of its huge impact on the rental income that comes from real estate development in Hyderabad. Before putting up your property for rent, make sure you go through all the clauses and understand how each of the taxes actually works.

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