what is rent?
Rent is defined as that part of the income which is paid by the tenant for the use of land and premises of the owner. It is paid by the owner to his owner either monthly on a fixed date or annually. Rent is the income which is attributed to the ownership of the land i.e., it is to be paid for the use of the land.
What is Rent Agreement?
Rent Agreement is a legal contract between the owner and the tenant for a fixed period of time. This agreement comprises of pre-discussed terms and conditions through which the tenant has the right to use and have temporary possession of the owner’s property. This agreement is required to be signed by both the owner and tenant. It is a standard contract but the terms of the contract can be amended by the mutual understanding between the owner and the tenant.
Advantages of Rent Agreement
- Legal evidence
- Address proof
- Helps in getting bank loans
- Secures unexpected expenses
- TDS benefits
When is Rent Agreement required to be used?
- When the owner wants to let out his property.
- The tenant has to occupy the property for a predefined fixed term – week to week, month to month, year to year.
Documents required for Rent Agreement
By the owner:
– Original copy of proof of ownership
2 passport size photos
– Aadhaar Card copy
– Any other identity proof issued by the Government of India
– Stamp paper
By the Tenant:
– 2 passport size photos
– Aadhaar card copy
– Any other identity proof issued by Government of India
Contents of Rent Agreement
- Name of the owner and the tenant
- Description of the property
- Cost of the rent
- Dates – commencement, extension of date and late charges
- Security amount to be paid
- Mode of payment of rent
- List of equipment and amenities that the tenant can use
- Penalties for violation
- Parking, repair and electricity charges
The renting of property is for either residential or commercial purpose. The rent agreement between the tenant and the owner should be printed on a stamp paper of minimum value of Rs. 100 or Rs. 200. The amount of stamp duty is 1% of the total rent plus the deposit paid annually or Rs. 500/-, whichever is lower.
If it is a 11 month rental agreement, then registration of rent agreement is not compulsory. However, it is advisable to get the agreement registered for the benefits attached to it
From the rental income, a property owner is allowed to deduct municipal taxes on the property, rent that is not realized, a 30% standard deduction on the annual value of the property, as well as interest on the money borrowed for the renovation of the property.