Tax on rental income

Tax queries 714 views 4 replies

Vivek

Finance Professional

73 Points Joined November 2012

Hi there, I have a query as follows.

Lets say, a Person has TWO Properties.

One is Self-Occupied and the other is let-out to a Company.

The monthly Rental income (Lease) from the company is Rs.75,000/-.

I understand that as per Indian Tax Laws, ANY ONE OF THE PROPERTY can be offered or shown as Self-occupied (SOP) and other as deemed to be let out (DTLO).

Example: Lets says, the fair rental value of Self Occupied property is Rs.10,000/- and the rental income from lease to company is Rs.75000. Tax will definitely be higher if one shows the rental income from company.

I was thinking if one shows the leased house as Self-occupied (as permitted by IT Laws) and the Self-occupied as deemed to be let out, one can save huge amount by way of taxes.

Kindly, let me know, if i am right in my understanding.

Also, the choice of SOP and DTLO is it only for individual tenants or also for Company tenants.

Many Thanks in Advance.

Replies (4)

Ankit

Articles

390 Points Joined May 2012

Eaxctly you are thinking right you have the option of showing any of the housr as SOP & DTLO...its totally up to the assessee to show any of the housr as SOP.

Vivek

Finance Professional

73 Points Joined November 2012

The Second Property is let out to a company (not an individual).

Does the Income Tax allow this choice of interchangebility, irrespective of the status i.e., individual, firm, company or bank.

Also, if the property is let out to company or bank, can the assessee claim Standard deduction of 30%.

Sandeep

Chartered Accountant

60 Points Joined November 2008

There is no restriction on choosing a property as self occupied and all others as Deeemed to be let out.

However, this choice can be exercised only when no other income is derived from such properties.

If you are getting rent from a property, you can no way show it as self occupied. It is not the intention of law that even if you have rental income, you can show it as self occupied.

The example provided by you doesn't lead to tax saving but for tax evasion.

CA. Ankit Khemka

CA in Practice

45 Points Joined October 2007

Dear Vivek

A person cannot claim one property to be self-occupied if such property is actually let-out. The option of choosing one property as self-occupied and other as Deemed to be let out is available only when both of them are lying vacant and are not rented.

But, in the present case, since the property is actually let out, assessee is bound to give tax on such property.

Further, under the head "Income from House Property", deduction of 30% is allowed to everybody.