Within the travel business, we are noticing the emergence of a new trend. Airbnb is changing how people view homes; not just as places to live, but also as venues for hosting and socialising. More homes are welcoming tourists, and visitors are choosing more intimate lodging options over hotels. The data reflects this change: in the third quarter of 2024, the local market expanded by more than 30%, indicating a growing national preference for short-term rentals, according to Amanpreet Singh Bajaj, General Manager of Airbnb India. To make extra money, homeowners are increasingly using these chances, and while short-term rentals give travellers access to homes, many hosts fail to consider the tax implications of short-term rentals. This is to help our readers understand the nature of taxation, the deductions and compliance for an Airbnb host.
1. Is Short-Term Rental income taxable in India?
Indeed! Any money received from renting a home on websites like Airbnb is taxable under the Income Tax Act of 1961, however how it is taxed varies depending on the classification of the rental activity:
- Revenue from residential real estate: Your income is taxed under this category if you occasionally rent out all or a portion of your residential property.
- Revenue from business & profession: If you run multiple Airbnb properties or operate your rental like a business unit, your income may be classified as business income.
See more: Top 5 tips to convert your home into an Airbnb
2. TDS & GST: What the hosts must know?
Tax Deducted at Source, or TDS
- Before getting paid by corporate tenants, you must subtract 10% TDS if your annual property rental income exceeds ₹2.4 lakh.
- TDS regulations may vary based on whether your Airbnb guests are foreign entities or businesses.
Goods and Services Tax, or GST
- However, you have to register for GST (18%) if your annual rental revenue surpasses ₹20 lakh (₹10 lakh in states that fall under specific categories as listed below).
- Any property rented out for residential use is not subject to GST; however, short-term rentals, businesses, and co-living operators may be subject to GST.
GST Registration Thresholds based on State Categories
| Category | States/UTs | GST Registration Threshold |
| Special-Category States (As per GST Act) | Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand | ₹10 lakh |
| Other States & Union Territories | All remaining states & UTs (including Assam, Himachal Pradesh, and Jammu & Kashmir, which no longer fall under the special category for GST) | ₹20 lakh |
3. Tax Deductions for profit making
The idea is to smartly lower your tax burden, so for that, you can claim deductions on the:
Standard deduction
- 30% deduction of Net Annual Value (NAV) under Section 24(a) on rental income to cover maintenance and repairs.
Home loan interest deduction
- In case of a home loan availed you can claim interest deductions up to ₹2 lakh per year under Section 24(b).
Depreciation & repairs
- You can claim depreciation on furniture, appliances, and interiors used for the rental if it is classified as business income.
Utility bills & hosting costs
- Electricity, WiFi, cleaning services, and Airbnb service fees can be deducted if the property is run as a business.
4. How to stay compliant?
Filing the ITR correctly
- ITR-1: This is for salaried individuals declaring rental income under “Income from House Property.”
- ITR-3: While operating Airbnb as a business, you must file under “Income from Business or Profession.”
Keep proper documentation
- Hosts should consider maintaining rental agreements, bank statements, Airbnb payout reports, expense invoices etc. to validate these deductions while filing the ITR.
Advance tax payments
- If your Airbnb property generates significant income for you, the hosts must consider paying advance tax quarterly to avoid penalties at year-end.
Tax compliance for co-hosts & shared revenue models
- Income declaration: In the co-hosting model, they must report earnings as taxable income, even if Airbnb pays them directly. Must note, rental income is added to the host’s total income and taxed as per applicable income tax slabs.
- GST & TDS: Co-hosts may also need to comply if the primary host is GST-registered. TDS at 10% may apply if rental income exceeds the threshold as explained above.
- Expense deductions: Revenue splits should be documented to claim proportional deductions on expenses like maintenance and service fees, this needs to be done for clarity for legal purposes.
- Expenses related to the rental activity (e.g., maintenance, utilities) should be proportionally divided among hosts based on their income share, again all documented for legal requirements.
5. Common tax mistakes Airbnb hosts make
- Not reporting Airbnb income – Income Tax departments are tracking rental transactions through property registries and digital payments, so one must take notice of carefully reporting it.
- Ignoring GST registration – Many hosts unknowingly exceed the tax exemption limit and face penalties, so another thing to consider is staying informed about tax regulations and registering for GST on time to avoid fines and compliance issues.
- Failing to claim deductions – Missing out on maintenance, loan interest, and utility deductions increases tax liability. This is for the hosts’ profit, so redeeming this deduction can be financially helpful.
Housing.com POV
Short-term rentals, like Airbnb, are lucrative for an extra income source, but understanding tax regulations and compliance requirements is an assurance to maximising earnings while staying on the right side of the law, so consulting a tax professional can help Airbnb hosts navigate complexities, and avoid tax pitfalls. Happy hosting!
FAQs
If I only rent my house on Airbnb a few days a year, do I still have to pay taxes?
Yes, irrespective of the number of days the home is rented, any income generated on Airbnb is subject to taxes in India.
Are the items and equipment I use for Airbnb rentals deductible?
Yes, as previously said, you can claim depreciation on appliances and furniture as maintenance provided the money is categorized as company income.
What occurs if I fail to notify the tax authorities of my Airbnb earnings? Is this against the law?
It is important for the hosts to notify their Airbnb earnings. If not reported, it is against the law and can result in fines, interest on overdue taxes, and possibly legal repercussions which should be avoided at all times.
Is GST registration required for Airbnb rentals?
As required by the GST Act, you must register for GST if your annual rental revenue is above ₹20 lakh (₹10 lakh in states that fall under special categories).
Is it possible to deduct my Airbnb costs from my rental income for tax purposes?
Yes, the costs like upkeep, electricity bills, and service fees can be written off if Airbnb is operated as a business.
How do Airbnb rentals relate to TDS?
If your annual rental income exceeds ₹2.4 lakh, you must deduct 10% TDS before getting paid by corporate tenants.
Do hosts on Airbnb have to pay advance tax?
To avoid chaos, you can pay advance tax in quarterly instalments if your total tax liability in a fiscal year exceeds ₹10,000, however, there is no obligation for advance tax.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |