The interim Budget proposes to allow two house properties being considered as self-occupied property. Thus, the deemed rent is no longer considered taxable but, this amendment is likely to have an adverse impact from a taxation point of view.
Text: Tapati Ghose, Partner, Deloitte India Under the current provisions, if an individual owns more than one house property, only one property is allowed to be considered as self-occupied property. The other house property, even though not let out, will be considered as deemed to be let out and notional rent is required to be offered for taxation. This was a pain point for individual taxpayers specially if their families were located at different locations and the house was not actually let out as they were still required to offer notional income to tax. In order to help such individuals, the interim Budget proposes to allow two house properties being considered as self-occupied property. This is definitely a welcome move as the deemed rent is no longer considered taxable and is in line with global principles. However, this amendment is likely to result in an adverse impact from a taxation point in some situations where a loan has been taken on the second house. Situation 1 Mr. A owns two house properties. Both these properties are currently self-occupied and there is no housing loan on the property. Under existing provisions, the individual will have tax liability on account of the second property being treated as deemed let out. The deemed rental income has been assumed to be INR 100,000 per year.Particulars | Property 1 (Self Occupied) | Property 2 (Deemed Let out) |
Net Annual Value (NAV) | NIL | 100,000 |
Less: Standard Deduction | NA | (30,000) |
Less: Interest on housing loan | NIL | NIL |
Income from house property | NIL | 70,000 |
Particulars | Property 1 (Self Occupied) | Property 2 (Deemed Let out) |
Net Annual Value | NIL | 100,000 |
Less: Standard Deduction | NA | (30,000) |
Less: Interest on housing loan | (300,000) | (400,000) |
Income from house property | (200,000) | (330,000) |
Particulars | Property 1 (Self Occupied) | Property 2 (Self occupied) |
Net annual value | NIL | NIL |
Less: Standard Deduction | NA | NA |
Less: Interest on housing loan | (300,000) | (400,000) |
Income from house property | (200,000) |