Are you a homeowner who has rented out your residential property to a registered person? If yes, then you must be aware of the tax implications on rental income generated from a residential house property. In this article, we will discuss the Goods and Services Tax (GST) on rental income of a residential house property given to a registered person.
GST is a destination-based tax system that is levied on the sale of goods and services consumed within India. With effect from 1st July 2017, GST replaced multiple indirect taxes such as excise duty, service tax, and value-added tax (VAT). The GST law has brought about significant changes in the taxation system of India, including the taxation of rental income generated from a residential house property.
As per the GST law, any individual or entity who rents out a residential property to another individual or entity is liable to pay GST if the annual rental income exceeds Rs. 20 lakhs. However, if the rental income is less than Rs. 20 lakhs, then no GST is applicable on the rental income.
It is important to note that the threshold limit of Rs. 20 lakhs is applicable on a PAN India basis. Thus, if the rental income generated from a residential property located in different states exceeds Rs. 20 lakhs, then GST registration becomes mandatory.
The GST on rental income of a residential house property is calculated based on the rent charged. The GST rate applicable on rental income is 18%. Thus, if the rent charged is Rs. 50,000 per month, then the GST payable would be Rs. 9,000 (18% of Rs. 50,000).
It is important to note that GST is not applicable on the security deposit received by the landlord at the time of renting out the property. However, if the security deposit is forfeited due to the tenant's default, then GST would be applicable on the forfeited amount.
If the annual rental income from a residential property exceeds Rs. 20 lakhs, then the landlord is required to obtain GST registration. The landlord would be required to file GST returns on a monthly, quarterly or annual basis depending on the annual turnover. The landlord can claim input tax credit on goods and services used for providing rental services.
In conclusion, if you are a landlord who has rented out a residential property to a registered person, then you must be aware of the GST implications on the rental income generated. If the annual rental income exceeds Rs. 20 lakhs, then GST registration becomes mandatory, and GST must be paid on the rental income at the rate of 18%. It is important to file GST returns on a timely basis to avoid penalties and interest.
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