If You Own More Than One House, Here’s How You Can Avail Tax Relief
Having more than one property can be stressful, as it suggests high income and thus high taxation. Everyone wants to save tax, and for the same, people invest in mutual funds, provident fund, insurance and other avenues. Saving on tax is one thing and making more property another. Till now it was believed that the number of houses you have, the higher you will be paying off as the tax. But recently, a piece of news has come up stating that people having more than one house can also avail tax benefits. Wondering how it is possible? Read ahead.
While filing for ITR (Income Tax Return) or tax scrutiny, you can now select another property, house to be precise, as self-occupied as per the latest amendment made by the Mumbai bench of Income Tax Appellate Tribunal (ITAT). Till now, if you had more than one house – one in which you lived and another that was not in use by you;if you did not put the second one on rent for any reason. Even then you had to pay income tax every year for the vacant property, you may or may not be using it; still, the charges were to be paid since the law assumed that the property was rented for the year. The revision in the income tax law has given the people a reason to smile. What does the amendment mean? Does it say that the owners can put a second property to be self-occupied as well? No, it simply means that you can choose one property for which the tax is highest and enter it as your place of residence. A property with lower net annual value can be then moved to the other section. This new amendment can be beneficial for those people who were earlier living in a smaller house but by applying for a low-interest rate Home Loan, got another property constructed. Meanwhile, the place of residence remained the same as per the documents.
After a while, you remember that you had mentioned the earlier house to be self-occupied and have no intentions of selling it or renting it, and you were not even living in it. There is no income from that particular house, but you will have to pay the tax for the house with the higher value as the change in the address of ‘self-occupied’ property was not applicable earlier. This moment could have made you worry about the high tax that you would need to pay. But not anymore! Now, you can change this statement and pay for the property with lower tax. This new policy would prevent the additional outgo of a significant amount as tax. This decision was an outcome of a case in Mumbai where the point of argument that proved to be decisive was that ‘there was no rule stating that once you exercise the function of claiming property to be self-occupied cannot be changed.’
Consider the following situation:
A person from a middle-class family, shifted from a small city like Meerut, to a locality in Delhi. He might be using the permanent address of the house he lived in earlier and which still belongs to him. Gradually, he earned money and with the help of finance companies or banks became a First-Time Buyer of Home Loan. He paid taxes for the house in Meerut as well as the rent in Delhi. Since he had applied for a Home Loan, he could build a property in Delhi too. But the property in Delhi was of higher value, and the tax on it was more than that of in Meerut. And even though the house in Meerut was vacant, he was in a way paying tax for both – housing tax for the house he did not live in anymore, and income tax for a home, which brought him no income as he was living in it.
This confusion arose because the self-occupied property changed in reality but not in documents. Since, the law stated that if a person possesses two properties, one is documented as self-occupied, and the other automatically is considered to be rented. It was unfair. The person only changed place to earn a better life. By paying a considerable amount as tax, he would be suffering for no good reason. This revision in the income tax lawhas been well received by the tax-paying population. If there is no income from the second house why should one pay for it according to the rented house rule? However, the whole thing has not been changed. The new law only states a change in address for your second property having a higher value. Everything else will remain the same. For the other property, you still will need to pay the income tax. But the property being smaller or of lesser value will not cost you as much as the higher valued property would. This amendment would be good news for you if you were thinking of making another property and apply for a Home Loan. The time is right, make a brilliant choice.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 18001034004 to know more about our products and offers.
& get instant approval