Taxes applicable on a commercial property you need to know about!

Investing in real estate is always a profitable venture in India. It continuously provides a high income to create wealth, helping you make your financial future stable and secure.

Sheth Cnergy, a commercial property in Thane, is an ultra-modern business complex that is worth the investment. Developed by Ashwin Sheth Group, this 12-storey commercial building has impressive office spaces and high-end amenities that will make it the bustling new centre of trade and commerce.

Anyone who owns a commercial property and rents it out to others to run a business or trade needs to pay some tax to the local government, such as the municipal corporation. Municipalities utilize money earned from taxes to construct roads, schools, and maintain public infrastructure for the benefit of the public.

Let’s read about Taxes that are applicable on a commercial property.

  • Tax on rental income from Commercial Property

Rentals received on any property you own will become taxable under ‘Income from House Property’. This tax applies to both residential as well as commercial properties. For example, the parking lot in your office premises or home is considered a commercial property; if rented out, it can be taxed. Rented commercial property in Mumbai will come under this tax.

  • GST on Commercial Property

When you rent out your property for commercial purposes and earn Rs 20 lakhs or more per annum, then GST will come into the picture. GST will be applicable at 18% on the taxable value.

  • Deductions from Rental Income received from Rented Property

There are provisions that help property owners make special exemptions and deductions to the amount paid as rental income tax in India. There are two exemptions allowed under section 24 of the Income Tax Act.

  1. I) Standard Deduction: Standard deduction is 30% of the gross value of the property for repairs and maintenance. This amount is calculated after deducting municipal taxes. However, you can reduce your municipal taxes if you pay them in a financial year.
  2. II)Deduction for Actual Interest paid on Home Loan: If you have borrowed any money to purchase, construct, repair, or renovate your property, you can claim a deduction for the interest payable on the money you borrowed. This benefit of interest deduction is available for all residential or commercial properties.
  • Taxation of Commercial Property used for own Business or Profession

If you are using the commercial property partially or entirely for your own business or profession, the proportionate share of such property is not taxable, so you cannot claim any notional rent for such property while calculating your profits in business.

However, you can claim the expenses incurred for repairing and maintaining said property. You can also claim the total interest as a business expenditure without there being any limit.

  • Taxation of Profits on Sale of Commercial Property

Any profit arising from the sale of a commercial property is a capital gain. This profit comes under the income category; therefore, you have to pay tax on the received income. This is called capital gains tax and can either be short-term or long-term.

Capital gains tax does not apply to any inherited property where there is no sale of property, only a transfer of ownership. However, if the person who inherited the property decides to sell it, capital gains tax will be applicable.

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