4th SERIES OF FAQs ON INCOME FROM HOUSE PROPERTY

Q. 15 Can a property not used for residence by the taxpayer be treated as self occupied property?

A self-occupied property means a property which is occupied throughout the year by the owner for his residence. Thus, a property not occupied by the owner for his residence cannot be treated as a self occupied property. However, there is one exception to this rule. If the following conditions are satisfied, then the property can be treated as self-occupied and the annual value of a property will be "Nil", even though the property is not occupied by the owner throughout the year for his residence :

?(a)?The taxpayer owns a property;

?(b)?Such property cannot actually be occupied by him owing to his employment, business or profession carried on at any other place and he has to reside at that other place in a building not owned by him;

?(c)?The property mentioned in (a) above (or part thereof) is not actually let out at any time during the year;

?(d) No other benefit is derived from such property.

Q. 16 What income is charged to tax under the head “Income from house property”?

Rental income from a property being building or land appurtenant thereto of which the taxpayer is owner is charged to tax under the head “Income from house property”.

Q. 17 What will be the tax implications if a person occupies more than one property for his residence? Can he treat all the properties as self occupied (SOP) and claim gross annual value (GAV) as Nil?

The SOP benefit (i.e.,?treating property as SOP and claiming GAV as Nil) is available only in respect of one property occupied by the owner for his residence.

If a person occupies more than one property for his residence, then the SOP benefit will be granted only in respect of any one property as selected by him and other property/properties will be treated as "Deemed to be let-out". Income from deemed to be let-out property is computed in the same manner as discussed in the case of "Let-out" Property.

?Q. 18 I own two houses. One is a farmhouse that I visit on weekends and the other is in the city that I use on weekdays. Is it correct to treat both these residences as self occupied?

No, for the purpose of Income-tax Law you can claim only one property as self occupied property and other property will be deemed to be let-out property.

Q. 19 I own two houses both of which are occupied by me and my family. Is there any tax implication?

Yes. As already mentioned in the earlier FAQ, income from house property is a notional income and only in respect of one residential unit, if self occupied, it will be considered as nil. In case of the other residential unit, fair rent will have to be treated as your income and will be taxed accordingly.

?Q. 20 In case of a self-occupied property, how much of interest on housing loan can be claimed as deduction?

In the case of self-occupied property, deduction under section 24(b) cannot exceed Rs.2,00,000 or Rs. 30,000 (as the case may be). If all the following conditions are satisfied, then the limit in respect of interest on borrowed capital will be Rs.2,00,000:

??Capital is borrowed on or after 1-4-1999.

??Capital is borrowed for the purpose of acquisition or construction (i.e., not for repair, renewal, reconstruction).

??Acquisition or construction is completed within 5 years from the end of the financial year in which the capital was borrowed.

??The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.

If any of the above condition is not satisfied, then the limit of Rs. 2,00,000 will be reduced to Rs. 30,000.