Income tax act in India allows citizens to declare only one house property to be self-occupied which will be exempted from the house tax liability. All the other property will be declared as rented property which will be taxable. The let out properties will be considered with the concept of deemed annual value. To calculate the deemed annual value, first, the municipal value and fair rental value will be calculated. These two values will be compared to determine the highest value between them and that highest value will be compared with the standard value. The value determined and the lowest of standard rent will be considered as deemed annual value. The Best Tax Structure in India To Select for Startups.
If the rental income received from the house property lower than deemed annual value, then the deemed annual value will be use to calculate the income from house property. But, if the rental income is higher than that will be used to calculate house property income under the House Property head. However, there is relief prescribed under income tax law to help the house owners with excess tax payment. If the property remains vacant for a period of the year than the actual rent received will be considered to calculate income from house property. This was provisioned to make sure that no taxpayer feel a burden in the situation when no rent has been generated from a property for a longer period.
The first interpretation of section 23(1)(‘c) depicts the describes that if the property is vacant for a whole year, the property value will be considered as NIL and house tax exemption can be claimed in that situation. In other interpretation, if the property will not be considered as a let out property and no exemption can be claimed mentioned under section 23(1)(‘c). The Income Tax Deductions You Can Avail Before It is Too Late.
The first interpretation can not be correct as in such case, there will be no difference left between a self-occupied house and a deemed to be let-out property. So, to claim the benefit mentioned under section 23(1)(‘c), one need to let the property for at least 1 month in a year and have to show that income from house property while filing ITR. The annual value of that property will be considered as the amount received for that one month rent and exemption can be claimed by showing a loss in house property.
In the case of having more than one house property, it is advisable that one must take expert opinion before filing the house tax liability details on the income tax form.