Subletting rental income

This query is : Resolved

Arun Kumar (Querist)
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20 January 2024 Dear sir/madam
Can we show rental income form house subletting under presumptive income u/s 44AD or 44ADA
or is it to be shown as income from house property while filing ITR?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 Rental income from house subletting should generally be shown as "Income from House Property" while filing your Income Tax Return (ITR), and not under presumptive income schemes like Section 44AD or 44ADA. Here’s a detailed explanation:

1. **Income from House Property:**
- Income from letting out a property or from subletting a property is categorized under "Income from House Property" for income tax purposes.
- This income is calculated based on the annual value of the property, which is the amount for which the property might reasonably be expected to let out from year to year.

2. **Presumptive Taxation Schemes - Section 44AD and 44ADA:**
- **Section 44AD:** This section is applicable to businesses, excluding specified professions. It allows eligible taxpayers to declare their income at a prescribed rate (usually 8% of gross turnover or receipts) and exempts them from maintaining detailed books of accounts.
- **Section 44ADA:** This section is specific to professionals (like doctors, lawyers, engineers, etc.). It allows them to declare their income at a prescribed rate (usually 50% of gross receipts) and exempts them from maintaining detailed books of accounts.

3. **Applicability to Rental Income:**
- Rental income from letting out a property is specifically covered under the head "Income from House Property" in the Income Tax Act.
- It is not covered under the definitions of business income or professional income that are eligible for presumptive taxation under Section 44AD or 44ADA.

4. **Filing in ITR:**
- When you file your Income Tax Return (ITR), you should report your rental income under the schedule "Income from House Property".
- The taxability of rental income is computed after deducting the standard deduction of 30% of the annual value and any municipal taxes paid during the year.

5. **Conclusion:**
- Rental income from house subletting should be reported under "Income from House Property" while filing your ITR.
- It is not eligible for presumptive taxation schemes like Section 44AD or 44ADA, which are intended for business and professional income, respectively.

Therefore, to ensure compliance with income tax regulations, you should accurately report your rental income under the correct head while filing your ITR. If you have any specific circumstances or complexities regarding your rental income, consulting with a tax professional or chartered accountant would be advisable.