Tax implication on purchase of second house property jointly

 There are various tax implications under the provisions of income tax laws and wealth tax laws for owning more than one house.

1) As per Section 56(2)(vii)(b) if any individual or HUF receives an immovable property from any person at inadequate consideration then the difference of Stamp Duty Value and consideration will be taxable in the hands of the recipient if the difference exceeds Rs. 50,000 – Thus the Stamp Duty Value must be checked.

2) As per Section 194IA, If the Consideration paid for property purchased is Rs. 50 Lacs or more, then the Buyer is required to deduct TDS @ 1% of the price on all payment made on or after 1st June 2013.  The applicability of TDS is only to the actual consideration specified in the transfer documents, and is not on the basis of a notional fair market value, such as a stamp duty valuation, even though such valuation may be higher.

3) In case assessee owns more than one residential house then only one house will be considered as self occupied and other house will be considered as “deemed to be let out”. It is on the option of the assessee to consider one property as self occupied and pay tax on the other. Even the second house remains vacant, estimated annual rent will be considered as taxable value after standard deduction of 30%.

However following deduction will be available to the assessee :-

i) In case of Self Occupied property interest upto Rs. 1.5 lacs and in case of Let Out or deemed to be Let Out interest paid without any limit on loan taken u/s sec 24(b).(For Both co owner Seperately)

ii) Principal Repayment of Loan Taken from Bank and other financial institution upto Rs. 1 Lacs u/s 80C. (For Both co owner Seperately)

4) As per the recent Insertion of Sec 80EE in the Finance Act 2013, assessee is entitled to additional deduction on account of interest paid to financial institution upto Rs. 1 lacs for the Asst Yr. 2014-15, if the following condition is satisfied :-

 i) The loan is sanctioned between the FY 1/4/2013-31/3/2014.

 ii) The loan sanctioned does not exceed Rs. 25 Lakh.

iii) The value of residential house does not exceed Rs. 40 Lakhs.

iv) The assessee does not own any other residential house as on the date of sanction of the loan. In other words, this house is supposed to be his self occupied property.

v) The assessee is a first time home buyer.

since the residential property is already owned by you, thus you are not first time home buyer and but co- owner of the new house property (i.e ur wife) can claim deduction as they are the first time home buyer and if 2nd house is treated as self occupied by you.

5) As per the provision of Sec 5(Iv) of Wealth Tax Act, one residential house of the assessee will be exempt and it is to the option of the assessee to choose one of the house as exempt and offer the value of other house to wealth tax. However if the value of 2nd house along with other assets does not exceeds 30lacs, then there will be no wealth tax liability.

CA. Amit Kumar Thakur