You are on page 1of 3

 What kind of income is taxed under the head "Income from House Property"?

 Is vacant land chargeable under the head "Income from House Property"?
 Is property occupied for business or profession also chargeable under the head
"Income from House Property"?
 What happens in case a person owns more than one residential house property?
 What are the tax benefits for a self occupied property?
 Is there any tax benefit available for investment in a new house property?
 What are the provisions of Wealth Tax Act and Gift Tax Act applicable to house
property?

What kind of income is taxed under the head "Income from House Property"?

Rent and other income from any flat, building or land appurtenant thereto is taxed under
head "Income from House Property".

Is vacant land chargeable under the head "Income from House Property"?

House property does not include vacant land. Income derived from a vacant land is
charged either under head “ Business or profession” or under the head “ Income from
other sources”?

Is property occupied for business or profession also chargeable under the head
"Income from House Property"?

No, property occupied for business or profession is not chargeable under the head
"Income from House Property". It is chargeable under the head “Income from Business
or profession”.

What happens in case a person owns more than one residential house property?

If a person happens to be owner of more than one house property for own residential
purposes then only one house (as per your choice and it is also not necessary that you are
residing in that house) can be treated as self occupied and the Annual Value of such
property be taken as nil, all other houses shall be deemed to be let out and Annual Value
shall be computed accordingly.

Further more, in a case where the house property cannot actually be occupied by the
owner due to his employment, business or profession carried on at other place and he
resides at that other place in a building not belonging to him, the annual value of such
house shall be taken to be nil subject to the following conditions :

1. That the property must not have been let out to others, and
2. No benefits have been derived by the owner.

What are the tax benefits for a self occupied property?


Interest on borrowed capital for purchase of residential house property upto a limit of
1,50,000/- p.a. can be set off against income from any other source viz. salary, business or
profession, income from any other source. This benefit is available even with respect to a
single house property which is self occupied by the owner. Further repayment of loan
upto a limit of Rs. 20,000/- p.a qualifies for rebate @ 20% under section 88 from
payment of income tax.

Is there any tax benefit available for investment in a new residential house
property?

There are tax exemption benefit with respect to capital gain, arising from the transfer of
residential house property or capital gains arising on transfer of a long term capital asset
other than a house property, if the capital gain or consideration is reinvested in purchase
of a new residential house property.

Benefit of Capital Gain arising from the transfer of residential house property (Sec
54) :
Capital gain arising from the transfer of a house property is exempt from tax provided the
following conditions are satisfied :
• "The house property is a residential house whose income is taxable under the head
"Income from house property" and the transferred by an individual or a Hindu
Undivided Family.
• "The house property (may be self occupied or let out is a long term capital asset
(i.e it must be held for a period of more than 36 months before sale or transfer)
• "The assessee has purchased a residential house within a period of one year before
the transfer (or within 2 years after the date of transfer) or has constructed a
residential house property within a period of three years after the date of transfer.
• "The house property so purchased or constructed has not been transferred within a
period of three years from the date of purchase or construction.

Amount of Exemption :
If the amount of the capital gain is less than the cost of the new house property, the entire
amount of capital gain is exempt from tax. On the other hand, if the amount of capital
gains is greater than the cost of the new house property, the difference between the
amount of capital gains and the cost of the new house is chargeable to tax as capital
gains.

Benefit of Capital gains on transfer of a long term capital asset other than a house
property (Sec 54F) :
Exemption under section 54F is available if the following conditions are satisfied :

• The assessee is an individual or a Hindu Undivided Family.


• The asset transferred is any long term capital asset but other than a residential
house.
• The assessee has purchased a residential house within one year before the date of
transfer or 2 years after the date of transfer or constructed within 3 years after the
date of transfer.
• The assessee should not sell or transfer the new house within 3 years of its
purchase or construction.
• The assessee should not own on the date of transfer of the original asset more than
one residential house. He should also not purchase within a period of two years
after such date or construct within a period of 3 years after such date any
residential house.

Amount of Deduction
If the above conditions are satisfied the capital gain will be treated in a concessional
manner as under : If the cost of the new house is not less than the net consideration in
respect of the capital asset transferred the entire capital gain arising from the transfer will
be exempt from tax. If the cost of the new house is less than the net consideration in
respect of the asset transferred the exemption form long-term capital gain will be granted
proportionately on the basis of investment of net consideration either for purchase or
construction of the residential house.

What are the provisions of Wealth Tax Act and Gift Tax Act applicable to house
property?
One house or a part of the house belonging to an individual or a Hindu Undivided Family
is not chargeable to Wealth Tax.

Gift made after 1.10.98 do not attract levy of gift tax either in the hands of donor or
donee.

You might also like