Published On: Wed, Jun 7th, 2017

Realtors Relieved as Rental Income Will Not Be Taxed Under GST

Until the last month, there were speculations of income from renting out a residence would be taxed at 18% under the Goods and Services Tax (GST). But such earnings will not be taxed under GST which comes as a  a big relief to home owners and individual investors relying on rental income.

“Services by way of renting of residential dwelling for use as residence” have been exempted from taxation web as per the decision taken during the 14th GST Council meeting at Srinagar on May 19.

A few years ago, income from renting residential property too was brought under the ambit of service tax but was later exempted. However, service tax on rental income from a commercial property stayed. At the moment, service tax of 15% has to be paid on commercial property rental income.

There are speculations within the industry that the next GST Council meet is likely to put lease earnings from a shop or a commercial space in the 18% bracket.

Experts said that with the realty market in doldrums, taxing rental income would have meant keeping individual investors at bay who vie for rental income.

With GST coming in, the rental income would have fallen further and wouldn’t have been lucrative enough for investment purpose as about 75 percent homes with developers are unsold, with each quarter adding to the inventory.

Depending on the location or city of home owned and rental value, the owner stands to earn around six months rent as his/her own income of the lease agreement of 11 months as  society maintenance, property tax, brokerage, upkeep on interiors, etc, eats up a larger share of rental income.

A month ago, Anuj Puri, chairman of Jones Lang LaSalle Residential (JLLR), a real estate consultancy, had said that the common apprehension is that if this were to happen, the rental housing segment may see a huge slump over the medium term since residential leases are currently not taxed at all.

Another industry player said that with a weak property market and rising inventory, a tax on rental income would have had a negative impact on the housing sector.

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