New Tax Rule for Landlords from November 1: Declare Rental Income or Face Penalty, Says Government

Agra: If you earn money by renting out your property—or are planning to—your digital compliance just got more serious. Starting November 1, 2024, the Central Government has enforced a new tax regulation that mandates landlords to declare rental income in their Income Tax Return (ITR). Until now, many property owners were earning rent under the radar—no registration, no receipts, and certainly no taxes. That loophole is now closing fast.

What Does the New Rule Say?

Under the updated tax framework, anyone who rents out a house, apartment, shop, or any residential property must declare that income under the “Income from House Property” head in their ITR. Failure to comply could result in hefty penalties and tax scrutiny.

Why This Crackdown?

Many landlords had been concealing their rental income by avoiding rental agreements or issuing receipts. This widespread practice led to significant tax revenue losses for the government. To curb tax evasion and increase transparency in the real estate sector, the authorities have now made compliance mandatory starting from the financial year 2024–25.

This means when you file your tax return next, undisclosed rental income could land you in legal trouble.

Understanding “Income from House Property” and Available Tax Relief

Under the Income Tax Act, rental earnings fall under the category of “Income from House Property”, which is divided into two types:

1. Self-Occupied Property: No income is considered from such property.
2. Let-Out Property: The entire rental income must be reported and is taxable.

However, landlords do get relief. The government allows a standard deduction of 30% on rental income. For instance, if you earn ₹2 lakh in annual rent, ₹60,000 is automatically deducted, and only the remaining ₹1.4 lakh is taxable.

Mandatory: Rent Agreement and Receipts

Under the new regulation, landlords are now required to:

• Issue rent receipts
• Prepare a formal rent agreement
• Maintain records of the tenant’s identity
• Provide details such as PAN or Aadhaar number

The Income Tax Department can now cross-verify rental claims using bank transactions, property registration data, and Aadhaar-linked digital trails. Ignoring these requirements can lead to:

• Penalties up to ₹10,000
• ITR scrutiny
• Back taxes with interest
• Legal action in severe cases

What the Government Aims to Achieve

This move is part of a broader push to:

• Reduce tax evasion
• Expand the tax base
• Track all real estate income
• Improve transparency

The increased revenue can then be used for infrastructure development and other public initiatives.

How Tenants May Be Affected

This change doesn’t only impact landlords. Tenants will now be required to:

• Enter into formal rental agreements
• Disclose detailed payment records, especially when claiming HRA for tax exemptions

Also, landlords might shift the tax burden by increasing rent, citing compliance costs.

Conclusion: Rent Smart, Declare Honestly

The government’s message is clear: If you’re earning from rent, declare it honestly. While the rule introduces new responsibilities, it also offers 30% tax relief, making compliance a fair bargain. If you’re currently renting out a property—or plan to—start preparing your paperwork, agreements, and tax disclosures now.