One of the most important transformations in the real estate market has been all thanks to the implementation of the new GST scheme. And what we are going to do here is discuss the impact of the recent change of the tax forms in the rental income of several residential areas.
The Existing Rental Income System Changed Due To GST
Presently, the rental income system is formed of different tax forms and levels that include the income taxes, the indirect taxations that the sub-let properties are subjected to, and the TDS that the lessee of the property is meant to deduct. However, with the change in the tax levels after the arrival of GST has certainly brought some changes in the rental incomes.
Generally, the landlord of a residential property is provided with a service tax registration that states that if the overall rental income doesn’t exceed the limit of Rs.10 lakhs per annum, then they are outside the purgatory of the service taxes.
But with the implementation of GST, there has been a change in all the taxes and the laws surrounding them. GST has increased the rental income limit up to Rs.20 Lakhs per year, but it does include all the services whether taxable or exempt. That means the residential areas also come under the shade of GST now.
There have been certain other changes made such as the reverse charge mechanism under GST that has brought a new dimension to the whole tax system. This mechanism which was a part of the service tax regime has been currently borrowed by GST, and it states that if a person registered under GST get his goods and services from someone who is not, then the former would have to pay the GST.
This recent implementation has brought a lot of change in the whole rental income system and will continue to do so in future.