With Kerala’s booming tourism and steady influx of professionals, many individuals earn significant income by letting out houses, apartments, or commercial spaces. While rental earnings provide a stable revenue stream, they also carry specific income-tax obligations. Incorrect reporting can trigger penalties, interest, or scrutiny notices. This comprehensive guide explains how landlords in Kerala should declare rental income, maximise deductions, and stay compliant—plus how OurTaxPartner.com can streamline the entire process.
1 · Rental Income Head: “Income from House Property”
Under the Income-tax Act, rent from residential or commercial property is taxable under the head “Income from House Property.” Even if you operate a sole-proprietorship, rental earnings are not classified as business income unless you provide hotel-style services (house-keeping, food, reception, etc.).
2 · How to Compute Taxable Rental Income
- Gross Annual Value (GAV) = Higher of actual rent received/receivable or expected rent (municipal value or fair rent, capped at standard rent if Rent Control Act applies).
- Less: Municipal Taxes paid by the owner during the year.
- Net Annual Value (NAV) = GAV – Municipal Taxes.
- Less: Standard Deduction @30 % of NAV (Section 24(a)).
- Less: Interest on Housing Loan (Section 24(b)). • Up to ₹2 lakh for self-occupied property let out during part of the year. • Full interest (no upper limit) for let-out properties.
- Taxable Income = NAV – 30 % deduction – Interest.
Example
A Kochi apartment earns ₹25,000 per month. Annual rent = ₹3,00,000.
Municipal tax paid = ₹12,000. Home-loan interest = ₹1,60,000.
- NAV = 3,00,000 – 12,000 = 2,88,000
- Less 30 % = 86,400
- Less Interest = 1,60,000
- Taxable Income = 41,600
3 · Special Scenarios for Kerala Landlords
3.1 Self-Occupied vs. Let-Out
If you own two houses and occupy one, the other is deemed “let-out”—even if vacant—and you must compute notional rent.
3.2 Co-ownership
Rent from jointly owned property is split in the ownership ratio (often 50:50), and each co-owner files separately, availing individual ₹2 lakh interest limits.
3.3 Deemed Rent on Second Property
If you leave one house vacant while living elsewhere (e.g., for work in Bengaluru), notional rent is still taxable unless the second house is claimed as “self-occupied” (permitted for one additional property from AY 2020-21 onwards).
3.4 TDS by Tenants
When monthly rent exceeds ₹50,000, the tenant must deduct TDS @5 % (Section 194-IB) and deposit it under your PAN. Always reconcile Form 26AS before filing.
4 · Advance-Tax and Return Filing
- If total tax liability (after TDS credit) exceeds ₹10,000, pay advance tax in quarterly instalments to avoid interest under Sections 234B/C.
- Use ITR-1 if rental income is from one house property and total income ≤ ₹50 lakh. Use ITR-2 for multiple properties or capital gains.
- Ensure interest-certificate, municipal-tax receipts, and loan-repayment schedule are on file for assessment queries.
5 · Common Mistakes to Avoid
- Claiming full rent when part-year vacancy is ignored—vacancy allowance applies.
- Not clubbing minor-child rental income with parent’s income (Section 64).
- Deducting maintenance charges from rent after applying 30 %—they must be part of GAV.
- Missing interest certificate from banks—rough estimates invite disallowance.
- Overlooking TDS mismatch—26AS must equal tenant deductions.
6 · How OurTaxPartner.com Simplifies Filing for Landlords
OurTaxPartner.com provides end-to-end assistance:
- Accurate computation of taxable rental income and interest deductions.
- Advance-tax planning with quarterly reminders.
- Form 26AS reconciliation for tenant-deducted TDS.
- Preparation and e-filing of ITR-1/ITR-2.
- Guidance on GST applicability for commercial rents > ₹20 lakh per annum.
- DSC issuance for hassle-free e-verification of high-value returns.
Conclusion
Declaring rental income correctly protects Kerala’s property owners from notices, penalties, and needless interest. Apply the standard deduction, track municipal taxes, and factor loan interest carefully. If managing multiple properties, co-owners, or foreign-currency tenants, professional support can save both tax and time.
Need expert help? Connect with OurTaxPartner.com for stress-free, accurate income-tax filing and maximise the returns on your rental investments.
