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Personal Finance News

Will Budget 2025 cut rental income tax? Experts call for deduction of maintenance charges

rajeev kumar
By Rajeev Kumar

2 min read | Updated on January 23, 2025, 15:52 IST

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SUMMARY

Budget 2025 tax cut expectations: Currently, flat or house owners pay mandatory maintenance charges to housing societies. This amount is used for the upkeep and maintenance of the common area. However, house owners are not allowed to claim the maintenance amount as a deduction while calculating income from a let-out property.

tax cut on rental income

Currently, homeowners can claim a deduction for taxes paid to the local authority. Representational image/Shutterstock

Union Budget 2025 expectations for house owners: As Finance Minister Nirmala Sitharaman prepares to present another budget speech on February 1, 2025, tax experts have demanded that maintenance charges paid by house owners to their respective residential societies should be considered for tax deduction.

Currently, flat or house owners pay mandatory maintenance charges to housing societies. This amount is used for the upkeep and maintenance of the common area.

However, house owners are not allowed to claim the maintenance amount as a deduction while calculating income from a let-out property.

Experts at Taxmann have urged the government to allow the deduction of maintenance charges while calculating income from a let-out property.

“As maintenance charges are compulsory and paid monthly or quarterly, it is recommended that Govt. should allow its deduction while computing the income from let-out and deemed let-out house properties,” the experts said in their pre-budget recommendation to the government.

Currently, homeowners can claim a deduction for taxes paid to the local authority under section 23(1). A standard deduction of 30% for income from house property is also allowed.

Tax actual rental income, not expected income

The Institute of Chartered Accountants of India (ICAI) has recommended that actual rent received should be subject to tax under the head "Income from house property" rent and not the expected rent.

Currently, in cases where expected rent is higher than actual rent, it is the expected rent that is chargeable to tax and not the actual rent, except in cases where actual rent is lower because of vacancy, the ICAI said in its pre-budget memorandum.

"It is suggested that the real income i.e., Actual rent received/receivable be subject to tax under the head “Income from house property” and not expected rent," ICAI said.

Redefine housing affordability

Tax experts are expecting that the upcoming budget would make homebuying easy for first-time buyers.
“Budget 2025 holds immense potential to redefine housing affordability for first-time buyers. By combining targeted tax benefits, innovative financial incentives, and streamlined regulatory reforms, the government can create a robust framework that encourages homeownership,” said Punit Shah, Partner, Dhruva Advisors, a tax advisory firm.

“Addressing critical issues such as higher interest deductions, incentivizing states to reduce stamp duties, and promoting green housing can significantly ease the burden on new buyers. Furthermore, enhancing affordable housing definitions and reinstating deductions like Section 80EEA can broaden the scope of benefits,” he added.

About The Author

rajeev kumar
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times.

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