Income Tax: Second self-occupied house is assumed to be let out and rental income taxed

By: | Published: November 27, 2018 1:59 AM

As per Section of Income-Tax Act 1961, only one house can be considered as a self-occupied property and the other one shall be assumed to be let out.

Interest deduction will be completely allowed for the property which is assumed to be let out and for self-occupied property interest deducted is restricted to Rs 2 lakh.

* I bought a under-construction flat with bank loan at Chennai and the sale deed was registered in May 2015. The flat was self-occupied in December 2017 and my parents stay there. I have shifted to Bangalore where I bought another flat and I stay there with my wife. Is my flat at Chennai rent free?
– HC Rao

As per our understanding both the flats owned by you in Chennai and Bangalore are self-occupied. As per Section of Income-Tax Act 1961, only one house can be considered as a self-occupied property and the other one shall be assumed to be let out. The choice of which property to choose as self-occupied is up to you. For the house considered let out by you, the tax liability will be calculated by considering the higher of municipal value or market rental as annual rentable value and thereafter deducting house tax, 30% standard deduction on deemed rental value and interest paid on bank loan from the annual rentable value. Further, interest deduction will be completely allowed for the property which is assumed to be let out and for self-occupied property interest deducted is restricted to Rs 2 lakh. Also, total loss under house property which can be claimed during a financial year is restricted to Rs 2 lakh. It must be noted that these provisions are applicable only for FY 2018-19. For FY 2017-18, as you own only one house property hence, no income shall be taxable under the head ‘Income from House Property’ as that one house will be considered self-occupied.

* I have been investing in equity mutual funds for 10 years. I will retire end of next year and I want to sell my mutual fund units every quarter and use the money for my daily needs. How will I calculate long-term capital gains?
—Shailesh Kumar Sharma

Capital gains on sale of long-term equity mutual funds in excess of Rs 1 lakh are taxable at 10% for sales made on or after April 1, 2018, without any indexation benefit. Capital gains for the purchases made before January 31, 2018 shall be calculated by deducting cost of acquisition from the sales consideration. The cost of acquisition shall be calculated as follows:

It shall be higher of the following: Actual cost of acquisition; Lower of Fair Market value as on January 31, 2018; the actual sales consideration received. Further, the sale of units shall be considered on First In First Out (FIFO) basis i.e. the units purchased first shall be considered to be sold first.

=The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to fepersonalfinance@expressindia.com

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