With the implementation of GST (Goods and Services Tax) in India, the taxability of rental income has been a topic of discussion among many business owners and startup founders. The rental income is no longer outside the purview of GST, and businesses that earn rental income must be aware of their tax liabilities under the GST regime.
Rental Income is the income received by an owner of a property from another individual or business entity for using their property on a temporary basis in exchange for a fee.
Under GST, if your rental income exceeds Rs.20 lakhs in a financial year, you must register for GST. Even if your rental income is below Rs.20 lakhs, you can still opt for voluntary registration for GST. Once registered, you must charge GST on your rental income and file regular GST returns.
The rate of GST on rental income depends on the type of property being rented out. If you are renting out a residential property, the GST rate is nil, and no GST is payable. However, if you are renting out commercial property or immovable property, the GST rate is 18%.
There are certain exemptions available under GST on rental income. The following are the main exemptions:
1. Residential properties- As mentioned earlier, renting out a residential property is exempt from GST. This exemption is applicable to both unfurnished and furnished residential properties.
2. Land- If you are renting out land for agricultural purposes, the GST rate is nil, and no GST is payable.
3. Government properties- Renting out government properties is exempt from GST.
If you are renting out commercial or immovable property, you are eligible for input tax credit on the GST paid on various expenses related to the property. These expenses include interest on loans, repairs and maintenance, and property taxes. However, input tax credit cannot be claimed on expenses related to residential properties.
Businesses earning rental income must file regular GST returns. The GST returns must include all the details of your rental income, including the amount of GST collected and paid, input tax credit claimed, and any other relevant details. Failure to file GST returns on time may result in penalties and interest.
With the above discussion, it is clear that rental income is a taxable event under GST, and businesses that earn rental income must be aware of the taxability of rental income under the GST regime. It is essential to keep track of your rental income and comply with the GST registration requirements and filing of GST returns to avoid any penalties or interest.
GeM Portal-Advantages, Facilities and Features
GST Implications on Non-Fungible Tokens (NFTs) in India
GST rates on Real Estate: A Comprehensive Guide
