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New Indian Express
5 days ago
- Business
- New Indian Express
Fresh I-T Bill brings clarity on taxation of rental income
NEW DELHI: After the Income Tax Bill was tabled in February, concerns mounted among homeowners regarding the computation of rental income from housing property after deducting municipal taxes, and the deduction of pre-construction interest for let-out properties. The newly passed Income Tax Bill 2025 confirms there will be no change in the taxation of rental income nor in deductions claimed on home loans, for both self-occupied and rented properties. "After February, there was a confusion on whether the tax on the rental income be imposed on the gross annual pay or on the net annual pay received from let-out properties," said CA Gaurav Makhijani, Associate Partner and Head of Tax (North India & Gujarat) at Rödl & Partner India. Under the Income Tax Act 1961, homeowners are taxed on the net annual value of rental income (gross rental income minus municipal tax) and can claim the standard deduction on home loans, whether the property is self-occupied or let out. The February bill created uncertainty over whether the deduction applied only to self-occupied properties. It also left unclear whether pre-construction interest could be deducted for let-out properties when computing income under 'House Property'. As per CA Ashish Niraj, Partner, A S N & Company Chartered Accountants, 'The Bill has given a clear and crystal view on both the matters. Now it has been explicitly provided that standard deduction of 30% will be calculated on Net Annual Value after deduction of Municipal Taxes. The February bill was giving the opinion that Pre-construction interest will be allowed on self occupied properties only, now it is clarified that pre-construction interest deduction will be allowed for let out properties also." Niraj explained that for pre-construction properties, deductions can be claimed in instalments after possession. For instance, if a homeowner takes a loan for an under-construction property in 2025 and takes possession in 2028, the total deduction for three years (2025–28) will be divided by five and added to deductions in subsequent years. Parliament on Tuesday passed the new Income Tax Bill 2025 to replace the six-decade-old Income Tax Act, 1961, that will be effective from April 1, 2026.
Time of India
05-05-2025
- Business
- Time of India
New ITR-2 form notified for income tax return filing AY 2025-26: What's new for taxpayers? Check top points
notified: The (CBDT) has notified the updated ITR-2 Form for AY 2025-26, which includes key changes such as separate reporting of , allowance of capital loss on share buybacks from October 1, 2024, and a raised threshold for reporting assets and liabilities to Rs 1 crore. Tired of too many ads? go ad free now The revised form also mandates reporting of section codes and enhanced disclosures for deductions like 80C and 10(13A). ITR-2 Form FY 2024-25: Top points Capital gains must now be reported separately for transactions before and after July 23, 2024, following changes in the Finance Act, 2024. Capital loss on share buybacks will be allowed if corresponding dividend income is disclosed as 'Income from Other Sources,' effective from October 1, 2024. The threshold for reporting assets and liabilities has been raised from Rs 50 lakh to Rs 1 crore of total income. Reporting requirements for deductions under sections like 80C and 10(13A) have been expanded. A new column has been introduced under Schedule-TDS to specify the section under which TDS was deducted (e.g., 194I, 194J). What does the new ITR-2 mean for taxpayers? Tax experts have expressed mixed opinions on the new ITR-2 form, noting both the simplifications and the added complexity. CA Ashish Niraj, Partner at A S N & Company Chartered Accountants, welcomed the relief for non-business taxpayers from burdensome disclosure requirements: 'If we see till last year, Schedule AL, which was for assets and liabilities, was applicable if total income exceeded Rs 50 lakhs. But now, it's applicable if total income exceeds Rs 1 crore. Preparing details of assets and liabilities as of March 31st every year is a tedious task for non-business entities for which 2 is applicable. By increasing the limit to Rs 1 crore, taxpayers in the bracket of Rs 50 lakh to Rs 1 crore will get relief from preparing the details,' he told TOI. Niraj added that the requirement aims to resolve some of the earlier inefficiencies: 'Earlier, while entering TDS details in ITR 2, it was not required to mention the section under which TDS was deducted, such as Section 194I, 194J, etc. Now, a separate column is provided for the section. Sometimes, when TDS returns were not filed in time by the deductor or were filed with incorrect particulars, taxpayers used to enter TDS details such as TAN, Name, and amount manually. As there was no 'section' column, the tax department faced issues in processing and cross-verifying. Now, this new column will bring clarity in reporting.' The changes to capital gains reporting also reflect recent shifts in tax policy: 'Before July 23, 2024, the Long-Term Capital Gain rate was 20% with indexation. Tired of too many ads? go ad free now After July 23, 2024, a new rate of 12.5% without indexation was introduced. In the newly notified ITR 2, separate columns are added to report transactions before and after July 23, 2024, separately.' Niraj also pointed out the government's tightening of compliance around disability-related deductions: 'In recent years, the department has caught many fake claims for claiming refund or reducing tax liability under Section 80U, 80DD etc for disability. Now, disability certificate details etc. are required.' CA Gopal Bohra, Partner – Direct Tax at N. A. Shah Associates LLP, explained the updates regarding capital gains taxation: 'Considering the two tax rates applicable on capital gains for the FY 2024-25 (i.e. gains accrued up to July 22, 2024, and gains accrued on or after July 23, 2024), CBDT has introduced a split in Schedule Capital Gains to report separately the capital gains where transfer was before July 23, 2024, and where transfer was on or after July 23, 2024. Similarly, separate computation mechanisms are provided in ITR in relation to capital gains from transfer of land or building by resident individuals where such land or building was acquired prior to July 23, 2024. These changes in ITR will help the individual taxpayer to compute the correct tax liability on capital gains while filing the ITR.' Bohra also explained the impact of the Finance Act (No. 2) of 2024, which will affect share buybacks: 'As amended by Finance Act (No. 2) 2024 with effect from October 1, 2024, the buyback receipt will be taxed in the hands of the recipient as dividend under the head 'Income from Other Sources,' and the cost of such shares will be allowed as capital loss under the head 'Capital Gains.' Accordingly, in ITR-2, separate line items are added under Schedule 'Capital Gains' and Schedule 'OS' to disclose capital loss on buyback of shares on or after October 1, 2024, and receipt from such buyback taxable as dividend under section 2(22)(f) of the Act,' he told TOI. Sonam Chandwani, Managing Partner at S Legal & Associates, termed the new form a mixed experience for taxpayers. 'The ITR-2 form for AY 2025-26, feels like a mixed bag compared to last year's version. The new split in Schedule Capital Gains for pre- and post-July 23, 2024, gains is a smart move to align with the Finance Act's tax tweaks, but it's a headache for taxpayers juggling multiple transactions. Allowing capital losses from share buybacks after October 1, 2024, is a win for investors, though tying it to dividend income reporting feels like a bureaucratic trap waiting to trip people up. Bumping the asset and liability reporting threshold to Rs 1 crore is a relief for middle-income filers, sparing them tedious paperwork, but the beefed-up deduction reporting for 80C and 10(13A), plus mandatory TDS section codes, screams overreach. Honestly, while the form tries to balance clarity and compliance, it's tilting toward complexity, likely forcing salaried folks and HNIs to lean harder on CAs to avoid errors.'
