Friday , 15 December 2017
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HOW TO SAVE TAX ON INCOME FROM HOUSE PROPERTY

The scope of tax planning in respect of income form house propertyis much limited. The following points may be taken into account in the commotion.

(1)Tax treatment with respect to one self occupied house:

  • Where the owner is an the occupation of more than one house for the purposes of his own residence, the annual value of one house, as the assessee may specify on this behalf, is taken to be nil.
  • In computing income form self-occupied house property, the assessee can claim only one deduction, i.e. interest on loan taken for acquisition of the house property. Maximum deduction can be up to Rs 150000, if loan is taken on or after 1 April 1999.

Availing Self-occupancy Concession for more than One House:

Where the assessee occupies more than one house for self-occupancy

(a)   Transfer the other house to his son’s: Sec 27 is not attracted; therefore he cannot be deemed to be the owner of this house property. Son’s wife is deemed to be the owner of this house property. She may claim self-occupancy allowance under Sec.23 (2)

Thus, the annual value of the second house may also be taken as nil and the clubbing provision under Sec.64 (1) (VI) may be ineffective. (as there is no income to be clubbed)

Any transfer of property without adequate consideration is a gift. However gift from a relative is not taxable.

(b)   Loan to wife: If a second house is proposed to be acquired for self-occupancy, wife may be allowed a loan to purchase the house property. The husband cannot be deemed to be the owner under Sec. 27. Clubbing provision of Sec64 would be ineffective as the income of a self-occupied house is nil.

(2)Acquisition of House Out to Own Capital Vs. Borrowed Capital:-Interest on moneys borrowed or the acquisition of house property is deductible under Sec.24 (b) in computing the income from the house property. Thus, the assessee should avoid investing his capital in the house construction/purchase. Instead, the assessee may invest his funds in exempted securities to earn non-taxable income and acquire the house property out of borrowed money to reduce the incidence of tax.

About CA Karishma

I am a Chartered Accountant by profession and an avid teacher. Writing is my hobby and this blog is a platform to share knowledge and interact with prospective Chartered Accountants. I locate my work at the intersection of Chartered accountancy & education. I teach among others, Taxation at Tapasya Academy for CA, one of the premier institute for Chartered Accountancy course in Andhra Pradesh.

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One comment

  1. Thank u so much. plz promote and contribute articles

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