Only One Residential Property Can Be Claimed as Self Occupied for Income Tax Benifit.. by Ms. Parizad Sirwalla, KPMG

The other residential property owned will have to be considered as a “deemed let out property”.

by Ms. Parizad Sirwalla,  KPMG

I own a house in Chennai and plan to purchase another one. From income tax perspective, how many houses can be treated as self occupied?

—Ms. Sunita Chawla

Where an individual owns more than one residential property, any one of the property at the discretion of the individual is considered as a self-occupied property .

 Hence, the other residential property owned, even if not actually let out, will have to be considered as a “deemed let out property” .

Ms. Parizad Sirwalla,  KPMG

As you already own one residential property in Chennai, any subsequent purchase / or acquisition of residential property, if not actually rented out, will have deemed let out property implications.

Any one property at your discretion shall be considered as self-occupied property and the other properties shall be considered as deemed let out property. The deemed rent will have to be offered to tax.

The deemed rent has to be calculated by determining the rent at which the residential property may reasonably be let out, which may be based on valuations of similar properties in the neighbourhood or certificates from the society or a certified valuer.

You can claim deduction towards actual municipal taxes paid and standard deduction of flat 30 % (after deduction of municipal taxes) towards repairs and maintenance charges against the deemed rent.

Further, the entire interest on housing loan can be claimed as deduction against the net rental value.

The balance rent amount, if any, will be taxable under the head “income from house property”.

Additionally, you can claim deduction towards repayment of principal portion of housing loan subject to an overall cap of Rs.1 lakh per financial year  under section 80 C.

Since, you would own two residential properties and if the second residential property is not/likely to be rented out for at least 300 days in a financial year, there may be wealth tax implications for the second and subsequent houses.

However, if you actually rent out the second and subsequent properties, then the rental value shall be taxable.

Further, you can claim the aforesaid deductions towards municipal taxes, standard deduction and interest payment against the rental value. Also, any property rented out for more than 300 days in a financial year does not attract wealth tax implications.

About Ms. Parizad Sirwalla..

Ms. Parizad Sirwalla is Partner (TAX) at  KPMG

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