Income from House Property - Deemed to be Let Out - Income Tax

Shruthi (PCC Student) (111 Points)
Replied 22 June 2011

You said From the current year the house been lying vacant and so, this wont come under Deemed Let out property i guess.

This is called as Let Out Property kept vacant for the whole year.

So, the tax treatment must be

i)Annual Value - Nil

ii)(-) Muni.Tax - xxx

iii)NAV - i) - ii)

iv)Interest - xxx

v)HP Income - iii) - iv)

So you dont've to worry about 5000 or 10000 and also if its to be shown as deemed rental income in father's or son's respectively. Just the Annual value is Nil.

You will be getting Loss from House Property as you are going to show Interest paid as Deduction in the hands of Son, since u'r claiming entire deduction in his Return alone.

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 22 June 2011

Originally posted by : Shruthi
	You said From the current year the house been lying vacant and so, this wont come under Deemed Let out property i guess. This is called as Let Out Property kept vacant for the whole year. So, the tax treatment must be i)Annual Value - Nil ii)(-) Muni.Tax - xxx iii)NAV - i) - ii) iv)Interest - xxx v)HP Income - iii) - iv) So you dont've to worry about 5000 or 10000 and also if its to be shown as deemed rental income in father's or son's respectively. Just the Annual value is Nil. You will be getting Loss from House Property as you are going to show Interest paid as Deduction in the hands of Son, since u'r claiming entire deduction in his Return alone.

Sorry friend i have a different view....

Since the property was vacant for the full year, it will be treated as DLOP in hands of both father and son..

Father cannot get exemption , as the treatement has to be same in hands of both father and son.

So father has to pay tax on property not let out.

Further father can claim the rent paid by him in CITY B from his business income.

(Guest)

Mr. Harshit

Lovely name.

If you read S 23(4) it says that a property shall be treated as DLOP only when the assessee owns more than 1 residential house.

In the present case neither father nor son have two house. They have only one house. Both are residing in rented property.

Therefore S 23(4) is not applicable.

However S 23(2)/(3) becomes applicable. In your case property is called Self occupied property for residence. Or you can say property is kept vacant for self residence. (I hope Shruti understand )

Now the calculation

Annual value nil.

Interest on borrowed capital can be claimed as deduction to a maximum of Rs. 1,50,000. Assuming all the relevant conditions are satisfied.

1 Like

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 22 June 2011

Originally posted by : kaushal (taxbykk)
	Mr. Harshit Lovely name. If you read S 23(4) it says that a property shall be treated as DLOP only when the assessee owns more than 1 residential house. In the present case neither father nor son have two house. They have only one house. Both are residing in rented property. Therefore S 23(4) is not applicable. However S 23(2)/(3) becomes applicable. In your case property is called Self occupied property for residence. Or you can say property is kept vacant for self residence. (I hope Shruti understand ) Now the calculation Annual value nil. Interest on borrowed capital can be claimed as deduction to a maximum of Rs. 1,50,000. Assuming all the relevant conditions are satisfied.

AGREED.

1 Like

Harshit Kayan (Manager - FP&A) (26 Points)
Replied 22 June 2011

Originally posted by : kaushal (taxbykk)
	Mr. Harshit Lovely name. If you read S 23(4) it says that a property shall be treated as DLOP only when the assessee owns more than 1 residential house. In the present case neither father nor son have two house. They have only one house. Both are residing in rented property. Therefore S 23(4) is not applicable. However S 23(2)/(3) becomes applicable. In your case property is called Self occupied property for residence. Or you can say property is kept vacant for self residence. (I hope Shruti understand ) Now the calculation Annual value nil. Interest on borrowed capital can be claimed as deduction to a maximum of Rs. 1,50,000. Assuming all the relevant conditions are satisfied.

Hi Mr. Kaushal,

Many Thanks...!!

Query:

Won't this result in Son getting the dual benefit of HRA deduction as well as no deemed rental income..?

CHAITANYA (C.A.; C.S.) (90 Points)
Replied 23 June 2011

Originally posted by : Harshit Kayan

Query:

Won't this result in Son getting the dual benefit of HRA deduction as well as no deemed rental income..?

Let son or father claim it as SOP not a problem:

In suchcases; where assessee for his business or profession leaving in other city Annual VaLUE IS NIl u/s 23(2)(a)

however, HRA is paid for actual rent expenses incurred by employee (immaterial that employee having his own house or not)

therefore in this case whoever be claim property as SOP there is no problem and also not dual benrfit by anyone.

Navneet (Asst. Finance Controller (Alshaya India)) (42 Points)
Replied 23 June 2011

I have a different view regarding this. Here in the said situation the assessees have chosen their resp houses as residence. since the other property is vacant. it can give rise to a situation of 23(2) that is UN-OCCUPIED PROPERTY , it cannot give rise to a situation of DEEMED TO BE LET OUT because deemed to be let out arises only if the assesse is the OWNER OF MORE THAN ONE HOUSE.... here he is the owner of just one house. Therefore for income tax purpose (calculation of self and unoccupied property is in the same manner)

Annual Value = Nil

Municipal Tax = Nil

Nav = Nil

No ded u/s 24

Interest Subject to 1.5lcs ( Moreover only 50% eligible since co ownership even if he pays the whole interest still only 50 percent eligible)

(Guest)

Let there be dual benefit. But income tax act do not stop this dual benefit. avail the dual benefit. no problem

Navneet (Asst. Finance Controller (Alshaya India)) (42 Points)
Replied 24 June 2011

I did a bit of a research and what i could find was that such property will be treated as let out during the year but VACANT.... in this regard the annual value calculation will be subject to fair rent, municipal valation etc.... and accordingly the value is arrived at.

Panduranga Bhat (working) (52 Points)
Replied 24 June 2011

Originally posted by : Navneet
	I did a bit of a research and what i could find was that such property will be treated as let out during the year but VACANT.... in this regard the annual value calculation will be subject to fair rent, municipal valation etc.... and accordingly the value is arrived at.

Hi,

Since there is no income generated from the property, one cannot call it as letout property.

And there is no question of fair rent, muncipal valuation. In this case as son is paying the EMI he can avail the benefit of 80 C and interest repayment deduction.

Navneet (Asst. Finance Controller (Alshaya India)) (42 Points)
Replied 25 June 2011

U have to understand that Income from house property is the only head where even notional income can be charged. in that regard it can be said that whether he receives income or not is Irrelevant....