Mar 092015

Self-Occupied Property tax implication

When one property is owned for residential purposes

If you are using your property for residence throughout the year and it’s not let out or used for any other purpose – in such a case the Annual Value of the property is Nil. There is no income from your house property.

But if you occupy your house property to carry your freelancing work– any income or expenses with respect to this property shall be covered under the head ‘Profits & Gains of Business & Profession’. You will be allowed to deduct expenses that you may incur towards maintenance and repairs from your business income. Any rent receipts will be added to your income.

Where the property consists of one house in the occupation of the owner for his own residence, the annual value of such house shall be taken to be the nil, under section 23 (2)(a),if the following conditions are satisfied-

  • Condition 1-The property (or part thereof) is not actually let out during the whole(or any part)of the previous year and
  • Condition 2 – No other benefits is derived therefrom.

Practical cases-

  1. Mr X owns a property .Throughout the previous year2013-14,it is used by him (and his family members) for own residential purposes.No part of the property is let out or part to some other use.
  2. Mr Y owns a property .He sells the property on Dec1,2013. Between April 1,2013 and Dec 1,2013 it is used by Y and his family for residential purpose.It is neither let out nor put to some other use.
  3. Mr Z purchases a property on June 1,2013.Since then it is occupied by Z for his residential purposes. Neither it is let out nor put to some other use.
  4. Mr A own house property .During the previous year2013-14,he retains exclusive control over the possession of the house owned by him. Though he may not be actually present in house,when he is away from it,he is still in constructive possession of his residential house.

Computation of income

In this case of one property (which is let out or nor put to any other use) used throughout the previous year by the owner for his residential purposes, income shall be determined as follows –

Gross annual value                                                                    nil

Less; municipal tax                                                                    nil

Net annual value                                                                        nil

Less; deduction under section 24

Standard deduction                                                                    NIL

Interest on borrowed capital                                                    deductible

Income from House Property                                                  xxx

Impact if self-occupied property is used for carrying on any business or for own business purposes

Where an assessee uses his property for carrying on any business or profession, no income is chargeable to tax under the head” Income from house property”.

The Assessee, in such a case, is not entitled to claim any deduction on accounts of rent in respect of such house property in computing taxable profits of the business or profession.