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

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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.

The column originally appeared in Vivek Kaul’s Diary on November 3, 2016

 

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About vivekkaul
Vivek Kaul 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. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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