Skip to main content

Owners of more than one house get tax leeway

Owners of more than one house get tax leeway
The Mumbai bench of the Income-tax Appellate Tribunal (ITAT) upheld the right of a taxpayer to change the selection of a house property that would be treated as self-occupied and having a ‘nil’ annual value. Consequently, the notional rent from such a house will not be taxable.
In other words, if the taxpayer has in his Income-tax return declared a particular house property to be self-occupied, he can at a later stage during actual tax assessment of his case substitute this with another house property owned by him, which perhaps is in a more posh location. By doing so, it may be possible for him to reduce the notional rent that has to be offered for tax and lower his I-T outgo.
Under the I-T Act, where an individual owns more than one house, he can only treat any one of his properties as ‘self-occupied and having a nil annual value’. Annual value, in general terms, is the notional rent that the property would ordinarily fetch.
The other house properties, even if they are not given out on rent, are assumed to have been let out and I-T is payable on the notional rent. Certain deductions such as municipal taxes are permitted. Further, a standard deduction of 30% is allowed and I-T is payable on the balance component.
To mitigate I-T liability, taxpayers opt to choose that house property as ‘self-occupied and having a nil annual value,’ which would otherwise have had the highest adjusted annual value and would entail a higher I-T outgo.
“Sometimes, in cases where a dispute arises with I-T authorities on the annual value of a property, the taxpayer, since he has the choice, may change his selection during assessment proceedings, if it is advantageous to do so,” says Gautam Nayak, tax partner at CNK & Associates.
“It’s high time the government reconsiders this taxation. With housing finance being so readily available now, it is not only the rich people who have more than one house,” adds Nayak.
In an ITAT case , Venkatavarthan N Iyengar had three properties at Juhu, Santacruz East and Vasai. In his I-T return, he had declared his Vasai property as ‘self-occupied and having a nil annual value’. Later during course of tax assessment, he opted to substitute the Vasai with Juhu.
The I-T officer held that making a change during tax assessment is not permissible and the dispute reached the ITAT. Iyengar submitted that the I-T Act gives an option to the taxpayer to determine which of his properties he should treat as self-occupied.
The ITAT, in its order of May 23, observed, “The I-T Act nowhere states that the option of selecting a self-occupied property, once exercised, cannot be changed.”
Times of India, New Delhi, 08.06.2018

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s