House property
This query is : Resolved
31 May 2012
A has been living in a rented house during f.y 2011-12 with rent of Rs 20000 per month.However during the year, in July 2011 she became owner of 33% portion of a residential house by way of gift from her father, along with two of her siblings, each owning 33% share. Father and a brother were residing in this house and continued to live therein.
However in Oct 2011 all joint owners i.e. A and her both siblings decided to redevelop this house by constructing a 4 story house on the same plot. Hence the house was demolished and fresh construction started during the year.
A has subsequently purchased another house with full ownership on 25 March 2012 and occupied the same.
Now my questions are:
As A owns 2 properties on 31 March 2012, does she has to indicate the same in her ITR for A.Y 2012-13. If so, will there be a notional rental income for 1 house, even though same was not rented at all and was not in her ownership for full year.
If notional rent for 1 house is to be considered in her ITR, how the same will be computed and shown, as ITR has no provision to indicate ownership for part of the year?
She wants to reflect ownership of both properties in the ITR to avoid any future query when and if she and her siblings decide to sell part of redeveloped property.
She also wants to take advantage of Rs 24000 deduction as rent paid u/s 80GG. Can she do so, considering she has paid rent for full year?
However in Oct 2011 all joint owners i.e. A and her both siblings decided to redevelop this house by constructing a 4 story house on the same plot. Hence the house was demolished and fresh construction started during the year.
A has subsequently purchased another house with full ownership on 25 March 2012 and occupied the same.
Now my questions are:
As A owns 2 properties on 31 March 2012, does she has to indicate the same in her ITR for A.Y 2012-13. If so, will there be a notional rental income for 1 house, even though same was not rented at all and was not in her ownership for full year.
If notional rent for 1 house is to be considered in her ITR, how the same will be computed and shown, as ITR has no provision to indicate ownership for part of the year?
She wants to reflect ownership of both properties in the ITR to avoid any future query when and if she and her siblings decide to sell part of redeveloped property.
She also wants to take advantage of Rs 24000 deduction as rent paid u/s 80GG. Can she do so, considering she has paid rent for full year?
31 May 2012
1. 80GG Deduction : Not available as certain conditions could not be fulfilled.
.
2. She may Show "Construction Work in Progress" in respect of the house under construction.
.
3. Independent New House Purchase may be treated as Self Occupied for FY 2011-12.
.
.
2. She may Show "Construction Work in Progress" in respect of the house under construction.
.
3. Independent New House Purchase may be treated as Self Occupied for FY 2011-12.
.
01 June 2012
Thank you Mr. Bafna for your response.
I have a doubt -- if the assessee is owner of a second house, (which is not let out), only for part of the year, does he get assessed for full Annual Rental Value? The period is not considered?
Kindly clarify. Thanks again.
I have a doubt -- if the assessee is owner of a second house, (which is not let out), only for part of the year, does he get assessed for full Annual Rental Value? The period is not considered?
Kindly clarify. Thanks again.
28 July 2024
Here’s how to handle the various aspects of the house property situation described, including taxation for the Assessment Year (AY) 2012-13:
### **1. Reporting Ownership of Properties in ITR**
**Ownership and Reporting**:
- **Property 1**: The house owned by A (33% share) was demolished in October 2011 and was under redevelopment. This property was not rented out and hence had no rental income.
- **Property 2**: A purchased a new house on 25 March 2012 and occupied it.
For AY 2012-13, the taxpayer must disclose both properties in the ITR, even if they were not fully owned or rented out during the entire financial year.
**Notional Rental Income**:
- **Redeveloped Property**: Since this property was under construction and not rented out, it does not attract any notional rental income for the period of construction. However, it must be disclosed as "self-occupied" or "deemed to be self-occupied" if there is no rental income.
- **New Property**: The property purchased on 25 March 2012 should be considered as self-occupied for the financial year 2011-12. Since this property was occupied by A for part of the year, there is no notional rental income that needs to be calculated for the period it was actually occupied.
**Handling Notional Rent for Part of the Year**:
- If a property is not rented out and is self-occupied, there is no requirement to compute or show notional rent. Notional rent only applies to properties that are not self-occupied but are let out. Since A’s new house was occupied by her, it is considered self-occupied for the period it was owned during the year.
### **2. Claiming HRA and Rent Paid Deduction (Section 80GG)**
- **Section 80GG**: If A is claiming rent paid under Section 80GG, it is important to ensure she meets the criteria, such as not owning any residential property in the city where she is claiming HRA. Given the complexity and the fact that she has paid rent for the full year, A should ideally be allowed to claim the deduction under Section 80GG for the rent paid, provided that she meets all other eligibility conditions.
### **3. Annual Rental Value (ARV) and Notional Rent**
**Notional Rent Calculation**:
- For the period that A was the joint owner (before the house was demolished), there is no rental income to report as the property was not generating any rent.
- For the period after the new property was purchased and occupied, there’s no notional rent if it’s self-occupied.
**Declaration in ITR**:
- **Redeveloped Property**: Indicate it as "Self-Occupied" or "Deemed to be Self-Occupied" if it was not rented out.
- **New Property**: Declare it as "Self-Occupied" since A was living in it after purchase.
### **4. Detailed Steps for ITR Filing**
1. **Disclose Property Details**: Both properties should be disclosed in the ITR under the “Income from House Property” section.
2. **Enter Details for Each Property**:
- **Property 1**: Disclose as self-occupied or deemed self-occupied, with no rental income.
- **Property 2**: Disclose as self-occupied, with no rental income since it was occupied by A.
### **5. Referencing Sections**
**Income Tax Act Sections**:
- **Section 24(b)**: Deduction for interest on housing loan.
- **Section 10(13A)**: HRA exemption.
- **Section 80GG**: Deduction for rent paid when HRA is not received.
**Guidance from Case Laws**:
- You may not find specific case laws for partial-year ownership, but the principles of self-occupied property treatment and deductions will apply based on the rules above.
### **Summary**
- **No Notional Rent**: For properties that are self-occupied or under construction, no notional rent needs to be reported.
- **ITR Reporting**: Disclose both properties, and ensure the new property is marked as self-occupied.
- **Rent Deduction**: Claim rent paid under Section 80GG if eligible, even with property ownership changes.
Ensure that all information is accurately disclosed and that any specific queries are addressed with a tax professional or CA for precise guidance.
### **1. Reporting Ownership of Properties in ITR**
**Ownership and Reporting**:
- **Property 1**: The house owned by A (33% share) was demolished in October 2011 and was under redevelopment. This property was not rented out and hence had no rental income.
- **Property 2**: A purchased a new house on 25 March 2012 and occupied it.
For AY 2012-13, the taxpayer must disclose both properties in the ITR, even if they were not fully owned or rented out during the entire financial year.
**Notional Rental Income**:
- **Redeveloped Property**: Since this property was under construction and not rented out, it does not attract any notional rental income for the period of construction. However, it must be disclosed as "self-occupied" or "deemed to be self-occupied" if there is no rental income.
- **New Property**: The property purchased on 25 March 2012 should be considered as self-occupied for the financial year 2011-12. Since this property was occupied by A for part of the year, there is no notional rental income that needs to be calculated for the period it was actually occupied.
**Handling Notional Rent for Part of the Year**:
- If a property is not rented out and is self-occupied, there is no requirement to compute or show notional rent. Notional rent only applies to properties that are not self-occupied but are let out. Since A’s new house was occupied by her, it is considered self-occupied for the period it was owned during the year.
### **2. Claiming HRA and Rent Paid Deduction (Section 80GG)**
- **Section 80GG**: If A is claiming rent paid under Section 80GG, it is important to ensure she meets the criteria, such as not owning any residential property in the city where she is claiming HRA. Given the complexity and the fact that she has paid rent for the full year, A should ideally be allowed to claim the deduction under Section 80GG for the rent paid, provided that she meets all other eligibility conditions.
### **3. Annual Rental Value (ARV) and Notional Rent**
**Notional Rent Calculation**:
- For the period that A was the joint owner (before the house was demolished), there is no rental income to report as the property was not generating any rent.
- For the period after the new property was purchased and occupied, there’s no notional rent if it’s self-occupied.
**Declaration in ITR**:
- **Redeveloped Property**: Indicate it as "Self-Occupied" or "Deemed to be Self-Occupied" if it was not rented out.
- **New Property**: Declare it as "Self-Occupied" since A was living in it after purchase.
### **4. Detailed Steps for ITR Filing**
1. **Disclose Property Details**: Both properties should be disclosed in the ITR under the “Income from House Property” section.
2. **Enter Details for Each Property**:
- **Property 1**: Disclose as self-occupied or deemed self-occupied, with no rental income.
- **Property 2**: Disclose as self-occupied, with no rental income since it was occupied by A.
### **5. Referencing Sections**
**Income Tax Act Sections**:
- **Section 24(b)**: Deduction for interest on housing loan.
- **Section 10(13A)**: HRA exemption.
- **Section 80GG**: Deduction for rent paid when HRA is not received.
**Guidance from Case Laws**:
- You may not find specific case laws for partial-year ownership, but the principles of self-occupied property treatment and deductions will apply based on the rules above.
### **Summary**
- **No Notional Rent**: For properties that are self-occupied or under construction, no notional rent needs to be reported.
- **ITR Reporting**: Disclose both properties, and ensure the new property is marked as self-occupied.
- **Rent Deduction**: Claim rent paid under Section 80GG if eligible, even with property ownership changes.
Ensure that all information is accurately disclosed and that any specific queries are addressed with a tax professional or CA for precise guidance.
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