Is Second House Property – Create problem in Income Tax?
Is any exemption/deduction is available in income from House Property liable to Tax?
1) Self-occupied House Property: According to Income Tax Act, One house can be treated as SOP and does not create any liability . Further if a loan has been taken for purchasing such a House then from F. Y. 2014-15, Rs. 2,00,000 is allowed as deduction from total Income of the assessee. so that less tax will be levied.Interest on pre-construction loans can be availed in five years in equal installments after completion of construction the said house. The deduction of Interest under section 24(2) up to Rs.30,000 can be availed on loans taken for repairs and maintenance of houses. Thus taxpayer may stay happier with One House in Income Tax and in Real life.
2) Rented Property: According to the Income Tax, if taxpayers have a House and it is let out then the income of Rent shall be taxable. Deduction of Municipal Taxes shall be allowed from the said Income if such Municipal Tax is paid by the taxpayer. Standard Deduction of 30% of remaining income is available even though the expenditure is not met by the Taxpayer. Then the taxable income will arise after taking deduction of Interest on the Loans taken for such a House.
Now see what are the Provisions in Income Tax Act, when a Taxpayer already owns a house and again Purchases another house i.e., “Second House”?
If the Taxpayer is having a House at Ahmadabad and he purchases another Flat at Mumbai, then he has to show any one property as Self Occupied Property and has to pay taxes on second House. Meaning, Income from the second House is considered as Taxable Income which will be according to the market rates of rent. Irrespective of the fact that the second House is being Let out or not, it will be deemed as let out by the Income Tax Department. This means, it is not at all easy to have a second “House”. The Method of levying taxes even though the Income is not generated is appalling. Also the second House is liable for Wealth Tax.
Exemption in Capital Gains on the Purchase of New House .
According to section 54 of Income Tax, if the Taxpayer has sold a three years old residential property and purchased a new Residential Property then Exemption can be availed and the tax can be saved. According to section 54F of Income Tax if Taxpayer sells Capital Assets like a Plot, Shop, House etc. other than Residential House and Purchased one Residential Property then he can avail Exemption. That means Income Tax is giving more emphasis on a single Residential Property only. This means that from the F.Y. 2014-15 there is no deduction on second House. I.e., Only One house can be purchased or build up to save capital gains.
Deductions available to Taxpayer and provisions if there is loss from this source of Income?
Section 80 C of Income Tax, if the Taxpayer paid principal amount of it is repaid then deduction up to Rs. 1.5 Lakhs can be availed. If loss is incurred under this source of Income then according to section 71 of Income Tax, same can be adjusted in the income from any source. E.g. if any taxpayer has incurred a loss of Rs. 1 lakh in “Income from House Property” and the Taxpayer receives a salary of Rs.6 lakh then he has to pay Taxes only on Rs. 5 lakhs. According to section 71 B the set off of loss can be carried forward up to 8 years against “Income from House Property”. Again the set off of loss can be availed even though the Income Tax return is not filed before the due date.