How is revenue calculated for a home that’s deemed let-out?

I’ve purchased a flat distant from my office. I’ve not let it out at present. However, will I be eligible to say curiosity incurred on HBA (home constructing advance) beneath the brand new tax regime in case of a deemed let-out property? If I pay municipal taxes, how is revenue calculated? Do be aware that the approximate annual lease of comparable flats is ₹96,000 and municipal taxes come to ₹56,147 and ₹2,000 is the annual curiosity paid on HBA of ₹1.97 lakh.

—Name withheld on request

As per provisions of the Income Tax Act, 1961, a property could also be thought-about as self-occupied with a ‘nil’ annual worth, whether it is truly occupied by the proprietor for the aim of his residence or if it can’t be truly occupied by the proprietor, on account of him having to reside in one other home (not owned by him) attributable to his office (both employment or enterprise/ career associated) being at every other place. If a taxpayer has a number of homes which qualify for classification as self-occupied, the mentioned provision applies to 2 of such homes, which the taxpayer might select.

Any home in extra of the 2 chosen homes, which is self- occupied, shall be thought-about to be deemed let-out and a notional rental worth is required to be provided to tax towards such home as revenue from home property.

In your case, assuming you personal solely two self-occupied properties or much less (together with the topic property), the topic property will probably be thought-about as a self-occupied property and never a deemed let-out property.

Under the brand new tax regime, curiosity paid on housing mortgage shall not be allowed as deduction in case the property is handled as self-occupied property. In case the property is taken into account as deemed let-out property, curiosity paid on a housing mortgage shall be allowable as deduction to the extent of internet rental revenue. However, in case of loss beneath the pinnacle ‘income from house-property’, such loss shall not be allowed to be set-off towards every other heads of revenue or be carried ahead to the long run years.

As per the steering accessible on the income-tax web site, the gross annual worth of the deemed let-out property could also be thought-about because the affordable lease (i.e., increased of municipal worth of the property and honest lease that the property could also be anticipated to be let-out at, topic to a most of ordinary lease if the property is roofed beneath the Rent Control Act).

Parizad Sirwalla is accomplice and head, international mobility companies, tax, KPMG in India.

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Updated: 19 Sep 2023, 10:46 PM IST