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Here is Another Good Joke: Latest Income Tax Data Suggests India Has Just 23.7 Lakh Landlords

Nov 3, 2016

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In yesterday's column, I had explained how only a minuscule portion of India's population pays a bulk of the personal income tax collected by the government.

This conclusion was drawn based on the detailed income tax data for the assessment years 2013-2014 and 2014-2015, recently released by the government. The income tax returns for the income earned during the financial years 2012-2013 and 2013-2014 were filed during the assessment years 2013-2014 and 2014-2015, respectively.

In late April, earlier this year, the government had released income tax data for the assessment year 2012-2013. Based on this data some interesting observations can be made. In today's piece, I will look at income from house property declared by Indian taxpayers.

Let's look at Figure 1. It has details regarding individuals who declared a positive income from house property. Income from house property can also be negative.

Those declaring a negative income from house property would include individuals who have taken on a home loan. Interest paid on a home loan is allowed as a deduction against taxable income within a certain limit, on self-occupied property.

For the assessment years under consideration an interest of up to Rs. 1.5 lakh paid on a home loan could have been taken as a deduction against taxable income.

But that is not of importance in this piece. What we are considering here are taxpayers who are making some money from the homes that they own. These taxpayers are essentially landlords who own homes, rent them out and make money in the process.

Figure 1:

Assessment Year Number of individuals Total Income declared (in Rs. Crore) Average Income (in Rs.)
2012-2013 19,95,739 33,277 1,66,740
2013-2014 21,87,017 39,498 1,80,602
2014-2015 23,66,527 45,899 1,93,951

Source: Author's calculations based on data released by the Ministry of Finance.

As per the income tax records, in the assessment year 2014-2015, the total number of landlords in the country stood at around 23.66 lakh. Of course, this number included those showing a notional rent for tax purposes as well.

In the assessment year 2012-2013, the total number of landlords had stood at 19.95 lakh. This means a jump of 18.6 per cent over a two-year period. The average rent collected in assessment year 2014-2015, was at Rs. 1.94 lakh against Rs. 1.67 lakh in assessment year 2012-2013.

The average as usual hide the details. In the assessment year 2014-2015, more than 15.8 lakh individuals declared an average income of Rs. 66,000 from house property during the year. This works out to a monthly income of Rs. 5,500. Or this is the amount that these individuals made every month by renting out their homes.

In the assessment year 2012-2013, more than 14.55 lakh individuals had declared an average income of Rs. 60,000 per year. This works out to a monthly income of Rs. 5,000. Hence, it is safe to say that as per income tax records, the average landlord in the country earned a monthly income of Rs. 5,500 during the assessment year 2014-2015.

This figure seems to be low and out of place with the prevailing rents. People paying income tax primarily live in the big cities and such a low rent in a big city is practically unheard of.

Also, the total number of landlords in the assessment year 2014-2015 stood at 23.66 lakh. This is an extremely low number. As Arjun Kumar writes in a research paper titled India's Residential Rental Housing: "More than one-tenth (11.1%) of the households in India lived in rented houses in 2011, and, in this respect, there was a heavy bias towards the urban sector. Almost four-fifths of the total households living in rented houses in India (27.4 million) were in urban sector (21.7 million). Overall, the proportion of households living in rented houses was 3.4% and 27.5% in rural and urban sectors, respectively."

Hence, the total number of rented houses in the country as per the 2011 Census stood at 27.4 million or 274 lakh. In urban India, the number stood at 21.7 million or 217 lakh. Now compare this to the fact that only 23.7 lakh individuals in the assessment year 2014-2015 declared income from house property. This clearly tells us that many landlords are essentially not declaring the income that they earn from their homes.

It further means that rents are being paid in cash and in the process the total amount of black money in the country has gone up. What is also noteworthy is that Census 2011 numbers are now more than half a decade old. The total number of rental households would have only gone up since then.

In fact, as Kumar writes: "The number of households living in rented houses in India increased by 7.1 million (35.3%), from 20.2 million in 2001 to 27.4 million in 2011. The rate of growth in the number of rented households was higher than that of the growth rate of total number of households (28.5%) in India." There is no reason for this trend to have changed since 2011.

To conclude, when we talk about the black money problem that prevails in the country we tend to talk about the buying and selling of real estate as being a major reason. Nevertheless, the data clearly suggests that rental income is also a major part of the black money problem.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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4 Responses to "Here is Another Good Joke: Latest Income Tax Data Suggests India Has Just 23.7 Lakh Landlords"

Prashant

Nov 4, 2016

Hi

The title of the article is not corerct. Since one house which is self occupied is out of tax net fully, the number 23.5 Lakhs represents Individuals who either owns more than house or have house which is on rent . Thus , they are bound to show income in their tax return under House Property Income schedule

There maybe EXTREMELY high number of Individuals who own house and resides in that house . They are also landlords , but will never reflect in numbers of landlord counted from income tax return.

Then a huge number of houses maybe owned by Farmers who seldom file tax retrun as most of their income falls under agroculture income. So any rental income related to such houses are also not reflected .

2. Secondly , I feel the article is written in a RUSH or maybe I do not understand following paragraph

Figure 1 gives following data related to assessment year 2014-15

Assessment Year Number of individuals Total Income declared (in Rs. Crore) Average Income (in Rs.)

2014-2015 23,66,527 45,899 1,93,951

But the article says

"The average as usual hide the details. In the assessment year 2014-2015, more than 15.8 lakh individuals declared an average income of Rs. 66,000 from house property during the year. This works out to a monthly income of Rs. 5,500. Or this is the amount that these individuals made every month by renting out their homes"

Aeverage income per Individual is Rs 1,93,951 , not Rs 5,500

3. Here are some of reasons , why the reneted house may not come within taxation

i. The person who owns house has no income or income which totether with rental income is below exemption limit i.e Rs 2.5 Lakh or Rs 3 Lakh or the owner is senior citizen Rs 5 lakh. Those numbers will not reflect.

ii. Loan interest is more than rental in certain years

iii. House is owned jointly and the income from rental is divided . On each person , the rental is below exemption. It just happens in many cases - husband and wife buys house jointly....where the wife employes her savings and has only some other source of income.

Like (1)

RAMAMOORTHY KRISHNAN

Nov 3, 2016

I dont agree with this fact. It appears that the information is only on the basis of data of those who file returns.
.
Fact is that a lot of land is owned by agriculturists in semi-urban & rural areas and they dont file returns' If they are taken into consideration the picture will be very different

Like (1)

SUDHAKAR

Nov 3, 2016

While the number of landlords highlighted is indeed alarmingly low, the average monthly income calculated is prone to error. Some people buy 2nd house as a tax saving measure and ensure that the loan interest is greater than the rental income. After certain years when the rental income exceeds the interest outflow, the tax payer sells and upgrades to a bigger house which has an higher interest outgo compared to the rent and so on....The smaller flat may again be bought by someone else on loan for whom the loan interest may be higher…

Like (1)

S. Indrakant

Nov 3, 2016

it is an interesting exercise which confirms general expectation. I am not sure about the the resulting damage out of this black income as the people receiving them belong to middle class. Evasion is possible as many tenants do not insist on receipt for rent from landlords.It would be interesting to examine the number of persons claiming exemption under HRA Provision and amount of exemption claimed.

Like (2)
  
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