What would be eligible amount of deduction under section 24b towards interest on borrowed capital in the following scenario? Also, what would be the taxable income under the head Income from House Property?
A house property is self-occupied (in part) and a portion of it has been let-out for 25,000 per month for 12 months. The property has been acquired out of borrowed capital and the accrued interest for the FY 2013-14 as per the provisional interest certificate provided by the bank is 8 Lacs.
As per section 24b of the Act, the amount of deduction shall not exceed 1,50,000 in case of property referred to under 23(2).
Section 23 provides for determination of Annual Value.
As per 23(2) -
Where the property consists of a house or part of a house which—
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,
the annual value of such house or part of the house shall be taken to be nil.
However, 23(3) overrides 23(2) providing that -
The provisions of sub-section (2) shall not apply if—
(a) the house or part of the house is actually let during the whole or any part of the previous year; or
(b) any other benefit therefrom is derived by the owner.
Per section 23(1) -
For the purposes of section 22, the annual value of any property shall be deemed to be—
(a) the sum for which the property might reasonably be expected to let from year to year; or
(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable.
Queries:
1) What would be the taxable income under income from house property? Can it be interpreted that the benefit under 23(2) is not available as a portion of the house in our example is let-out and the annual value of the property has to be determined as per 23(1) for the whole house?
2) What would be the deduction eligible under section 24b? Can we apportion the interest component for the parts (ie.. self-occupied unit, Let-out unit)? If yes, please support your views.
A gentle request-
Suitable relevant assumptions which are implied could be made. Please support your views by providing relevant case laws in understanding the law. By posting here, I expect some meaning explanation to the subject matter.
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