 |
"Inherent capacity" denotes the
amount for which the property might be reasonably
let out. This could be the actual rent received
or annual ratable value fixed by the municipality,
or rent of the similar property in the locality,
etc.
Do I have to
pay Income Tax on Annual Value of the house
occupied by me?
No, when a house property is self occupied
the Annual Value of such property is taken
as "nil" and as such no income tax
is payable. In fact you shall be eligible
for deductions such as interest, etc., from
your total income.
However, if you happen to be the owner of
more than one house property for own residential
purposes then only one house (as per your
choice, it is also necessary that you reside
in that house) can be treated as self-occupied
and the Annual Value of that property shall
be taken as nil. All other houses used for
self-occupation shall be deemed to be let
out and the Annual Value shall be computed
accordingly and subjected to Income Tax.
What are the
deductions available to me in case of self-occupied
property?
Interest payable (whether paid or not on loan
for purchase, repairs, renewals, construction
or reconstruction of house property is allowed
as a deduction (from total income) up to Rs.
30,000/-.
However, where a house property is acquired
or constructed after 1st April 1999 and such
acquisition is completed within 3 years from
end of the financial year in which the capital
was borrowed for construction or purchase
of property, then the deduction allowable
on interest payable shall be up to Rs. 1,50,000/-
per annum.
It may be pertinent to note that the interest
attributable to the period from obtaining
of loan to the period prior to completion
of acquisition / construction is also allowable
as deduction in equal installments over five
successive financial years starting from the
year in which the acquisition or construction
is completed. However, this benefit is not
allowed for interest on loans taken for repairs,
renewals or reconstruction work.
What are the
deductions available to me in case of a property
given on rent or which is deemed to be let
out?
| The
following deductions are permissible: |
 |
| ·
|
Municipal
taxes actually paid as a deduction from
Annual Value |
|
| · |
30% of Net Annual
Value, after deducting Municipal Taxes
paid, towards repairs and collection
charges (allowed in notional basis irrespective
of the amount incurred) |
|
| · |
Interest on money
borrowed for the purpose of construction
or acquisition of a house property without
any upper limit |
What is the position,
if there is a loss under the head "Income
from House Property"?
In case of self occupied property, since the
Annual Value is taken as nil, deduction is
allowed on interest on borrowed capital upto
a maximum of Rs. 1,50,000/- effective Financial
Year 2002-03.
In case of a let out property there are no
restrictions on deducting the full interest
payable on loans and so there can be loss
under this head also.
Loss from house property can be set off against
income from another property and also from
any other head of income such as salaries,
profit and gains of business or profession,
income from other sources etc., during the
same financial year.
In cases where the loss cannot be set off
against any other heads of income within the
same year then the balance loss can be carried
forward and set off in subsequent years subject
to a limit of 8 years but only against income
from house property.
What is the benefit
of Capital Gain in case of a house property?
Benefit on sale of any capital assets (Section
54F)
The Income Tax Act, 1961 gives an individual
or HUF (Hindu Undivided Family), who does
not own a residential house, a concession
to purchase a residential house as and when
they sell a Long Term Capital asset (for e.g.
shares, bonds, debentures, motor car, etc).
When you sell a capital asset normally you
are required to pay tax on the gain on the
value of asset after the benefit of indexation.
If however, you do not own a residential house
you can reinvest the net consideration received
from the sale of capital assets in a residential
house property and if the amount invested
is equal to or more than the net consideration,
no income tax is payable on such Long Term
Capital gain. However, the following needs
to be noted for claiming such benefit.
|
| ·
|
You
should purchase the residential house
within a period of one year before or
two years after the date on which the
transfer took place or construct a residential
house within 3 years of such transfer |
|
| · |
You should not
own more than one residential house
property other than the new asset on
the date of transfer of the original
asset |
|
| · |
You should not
purchase a residential house other than
the new asset within a period of one
year or construct any residential house
other than the new house within a period
of three years after the date of transfer
of the original asset |
Benefits on re-investment in house property
(Section 54)
Apart from this if an Individual or HUF
reinvests in a residential house property
i.e. invests the sale proceeds of a residential
house property which has been held for more
than 3 years in purchase of a new house,
such reinvestment is exempt from Capital
Gains U/s 54 provided the new house is purchased
within one year before or two years after
the transaction or has constructed a residential
house within a period of three years.
What are the
other deductions available to me?
The following payments are eligible for
deduction from gross total income of an
individual or a Hindu undivided family,
to the extent of Rs. 100,000 U/s 80C of
the Income tax Act, 1956.
In computing the total income of an individual
or a Hindu undivided family, there shall
be deducted, the whole of the amount paid
or deposited in the previous year for the
purposes of purchase or construction of
a residential house property the income
from which is chargeable to tax under the
head Income from house property where such
payments are made towards or by way of
| a. |
any installment
or part payment of the amount due under
any self-financing or other scheme of
any development authority, housing board
or other authority engaged in the construction
and sale of house property or |
| |
|
| b. |
any installment
or part payment of the amount due to
any company or co-operative society
of which the assessee is a shareholder
or member towards the cost of the house
property allotted to him or |
| |
|
| c. |
repayment
of the amount borrowed by the assessee
from |
| |
|
| |
| 1. |
the
Central Government or any State
Government, or |
| |
|
| 2. |
any
bank, including a co-operative
bank, or |
| |
|
| 3. |
the
Life Insurance Corporation, or |
| |
|
| 4. |
the
National Housing Bank, or |
| |
|
| 5. |
any
public company formed and registered
in India with the main object
of carrying on the business of
providing long-term finance for
construction or purchase of houses
in India for residential purposes |
| |
|
| 6. |
any
company in which the public are
substantially interested or any
co-operative society, where such
company or co-operative society
is engaged in the business of
financing the construction of
houses, or |
| |
|
| 7. |
the
assessees employer where such
employer is an authority or a
board or a corporation or any
other body established or constituted
under a Central or State Act,
or |
| |
|
| 8. |
the
assessees employer where such
employer is a public company or
a public sector company or a university
established by law or a college
affiliated to such university
or a local authority or a co-operative
society; or
|
|
| d. |
stamp duty, registration
fee and other expenses for the purpose
of transfer of such house property to
the assessee. |
What are the
provisions of Wealth Tax Act and Gift Tax
Act applicable to house property?
One house or a part of the house belonging
to an Individual or a HUF is not chargeable
to Wealth Tax.
Gift made after 1.10.98 does not attract
levy of gift tax either in the hands of
donor or donee.
Any house property let out for more than
360 days in a year is exempted from wealth
tax.
What is the
position of Income from house property on
such property?
The owner of the property is liable to pay
tax on income from house property. The term
"owner" also includes deemed owner.
If one house property is self-occupied by
the owner for residential purpose, then
there will be no income from house property.
If the building or part thereof is used
by the owner himself for the purpose of
his own business or profession then there
will be no income from house property in
respect of such building, provided the profit
of such business or profession is chargeable
to income tax separately. Whenever a person
who owns a house property in one city is
transferred to another city, it has been
specifically provided that the annual value
of such a property would be taken to be
nil, subject to the fulfillment of following
conditions
| ·
|
The
assessee must own only one house property,
which is meant for his own residence |
|
| · |
He cannot occupy
that house property because of his employment,
business, profession, etc., away from
the place |
|
| · |
The property is
not actually let out or any benefit
derived therefrom |
|
| · |
No other deduction
will be available to the asessee |
What is the
position of capital gains on sale of residential
house property?
Capital gains arising on transfer of a residential
house, comprising building or land appurtenant
thereto, is exempt if the amount of capital
gains is utilised in acquiring another residential
house, either by purchase or by construction.
The conditions required to be fulfilled
to claim exception are:
| ·
|
The
capital asset being transferred is a
residential house property, the income
of which is chargeable under the head
"Income from house property" |
|
| · |
The house property
is a long term asset i.e. held by the
owner for more than 3 years |
|
| · |
The house property
has been transferred by the individual
or HUF |
|
| · |
The tax payer
purchases or constructs a new residential
house within the specified time |
|
 |
