Taxing issues for multiple homes
Investing in residential property is preferred due to many reasons such as capital appreciation, holiday home, regular income source and diverse investment portfolio, apart from the fact that a person gets a home to live in. However, it is important to be aware of the tax implications arising on account of owning more than one house property.
Tax breaks are also available when an individual procures loans for purchasing a house and accordingly, deduction from taxable income is available on principal repayment of home loan.
This is capped at ₹ 1.5 lakh under Section 80C of the Income Tax Act, 1961 (‘the Act’). This is irrespective of the number of homes owned and the purpose for which they are being used (ie whether for self-occupation or letting out).
In case of a self- occupied property, interest deduction on home loan is restricted to ₹ 2 lakh in a tax year. For a property that’s let out, deduction is available for the actual interest paid during the tax year.
In case of loss under the head ‘house property’ then the same can be set off against income under the other heads in the same tax year. Any balance loss, which is not set off, can be carried forward up to eight tax years and adjusted only against house property income in such tax year(s).
If an individual has more than one property in his name and if all such properties are being used for self-occupation or are lying vacant, then only one of such properties could be construed as self-occupied and its annual value would ld be taken as ‘nil’. The choice of treating any one house property as self-occupied is solely at the owner’s discretion and can vary with each tax year.
The other house property/ properties will get classified as “deemed to be let out” and fair rental value of each of such properties would need to be offered to tax. Gover nment policies with re gards t o ready reckoner rates can also be seen as one of the responsible factors. For instance, in the recent years of 2013-2015, the Maharashtra government has been increasing ready reckoner rates by 15-20% across the city. This is a significant jump for a city whose prices are already on the far side of high - and considering that in other major cities, the increase was relatively moderate. For instance, Gurgaon witnessed an increase of merely 10-12% during the same period. These factors limit the market’s ability to bring in new supply at speeds that matches with the rise in demand. Investor activity: High investor activity always plays a big