Tax implications in case of multiple house properties
This query is : Resolved
03 April 2014
what are the tax implications if an assessee has multiple flats and at a point of time such assessee destroys all the flats and builds a single house in the same area.Please clarify my doubt.thank you
03 April 2014
himself builds then no tax is applicable for the same.
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04 April 2014
i mean tax in case of income from house property.for example when a person has two self occupied properties then one would be treated as self occupied and the other one would be treated as deemed to be let out for tax computations.my question is if both the house properties are adjacent to each other and if they are made as one property by making some modifications then how will be the tax computed.will it be treated as it was treated earlier or in any new way.
26 July 2025
Good question! Here's how tax treatment works for multiple house properties, especially when two or more properties are combined:
---
### Basic Rule for Multiple House Properties:
* Under Income Tax Act, **only one property can be treated as "Self-Occupied" at a time**.
* Any other properties are treated as **"Deemed to be Let Out"**, and income is computed on **notional rent (reasonable expected rent)**.
* You pay tax on this deemed rental income after standard deductions.
---
### Your Scenario: Two Adjacent Flats Merged Into One House
If the assessee **destroys two separate flats and constructs a single house by merging them**, the tax implication depends on whether the **new property is considered as one single property or still two separate properties**.
---
### Key Points:
1. **If legally and structurally treated as one single house property:**
* The Income Tax Department will consider it as **one self-occupied property**.
* Since only one self-occupied property is allowed, you can claim **no deemed rent for any other property**.
* So effectively, you have **one self-occupied house property** for tax purposes.
* **No notional rent income is considered.**
2. **If still treated as two separate properties:**
* Then one will be self-occupied, and the other will be deemed to be let out.
* You will have to pay tax on notional rent for the deemed property.
---
### What to Ensure:
* The combined property should have **legal and municipal documentation** showing it as one property.
* For income tax, physical and legal evidence matters — like updated property tax receipts, municipal records, sale deeds reflecting it as one unit.
* If documentation reflects one house, tax is computed for a single self-occupied property.
---
### Summary:
| Situation | Tax Treatment |
| --------------------------------------- | ---------------------------------------------- |
| Two separate flats owned simultaneously | One self-occupied, others deemed to be let out |
| Flats demolished and rebuilt as single | Treated as one self-occupied property |
---
### Practical Advice:
* Update all relevant property documents to reflect the merged house.
* Keep supporting documents (municipal tax receipts, occupancy certificate).
* Inform Income Tax department during filing to avoid confusion.
---
If you want, I can help draft a note or example for how to mention this in your Income Tax Return!
---
### Basic Rule for Multiple House Properties:
* Under Income Tax Act, **only one property can be treated as "Self-Occupied" at a time**.
* Any other properties are treated as **"Deemed to be Let Out"**, and income is computed on **notional rent (reasonable expected rent)**.
* You pay tax on this deemed rental income after standard deductions.
---
### Your Scenario: Two Adjacent Flats Merged Into One House
If the assessee **destroys two separate flats and constructs a single house by merging them**, the tax implication depends on whether the **new property is considered as one single property or still two separate properties**.
---
### Key Points:
1. **If legally and structurally treated as one single house property:**
* The Income Tax Department will consider it as **one self-occupied property**.
* Since only one self-occupied property is allowed, you can claim **no deemed rent for any other property**.
* So effectively, you have **one self-occupied house property** for tax purposes.
* **No notional rent income is considered.**
2. **If still treated as two separate properties:**
* Then one will be self-occupied, and the other will be deemed to be let out.
* You will have to pay tax on notional rent for the deemed property.
---
### What to Ensure:
* The combined property should have **legal and municipal documentation** showing it as one property.
* For income tax, physical and legal evidence matters — like updated property tax receipts, municipal records, sale deeds reflecting it as one unit.
* If documentation reflects one house, tax is computed for a single self-occupied property.
---
### Summary:
| Situation | Tax Treatment |
| --------------------------------------- | ---------------------------------------------- |
| Two separate flats owned simultaneously | One self-occupied, others deemed to be let out |
| Flats demolished and rebuilt as single | Treated as one self-occupied property |
---
### Practical Advice:
* Update all relevant property documents to reflect the merged house.
* Keep supporting documents (municipal tax receipts, occupancy certificate).
* Inform Income Tax department during filing to avoid confusion.
---
If you want, I can help draft a note or example for how to mention this in your Income Tax Return!
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