Income from house property

I own a duplex house in which I stay with my family. Though I do not have any tenant for my house...

Published: March 14, 2009 12:32 am

I own a duplex house in which I stay with my family. Though I do not have any tenant for my house,I have let out my rooftop to a company that displays its hoardings on it and pays me an annual rent for it. I would like to know how I should treat it in my income tax return. The company says that it is paying me rent,but since my house is not let out,I think it should not be taxed under the head ‘house property’.

(Via Email)

The advertising company is right in stating that it is paying rental income to you. However,the amount received in your hands is not your income from house property,but your business income since it is derived from the display of hoarding and not from letting out the house on rent. The income shall reflect in your income statement accordingly. If there is any expenses incidental to such letting out (electricity expenses,repairs and maintenance,etc.),you can claim it as deduction from this income.

Do note that you will not be entitled to standard deduction or other related deductions under the head ‘income from house property’ from this income.

I have a transferable job. I was living in a rented accommodation in Pune until last year. This year,my company transferred me to Nasik. However,due to my children’s education,I have shifted alone. My family is still in Pune where I have recently purchased a house on home loan from my banker. Now I would like to know if I could claim tax benefit on the rent that I have been paying for my current accommodation along with the installments that I am paying for the house that I have purchased on loan. Since I am not staying in the house that I have purchased,please let me know the tax treatment for it as well. Do note that I am not deriving any monetary benefit out of it because my family is staying in it and I have not rented out any part of the house to anybody.

(Via Email)

You can surely claim both the tax benefits in your income tax return. Since you have been living in a rented accommodation,you can claim the tax benefit on account of the rent that you pay for it. Also,since you are repaying the loan that you have taken for your house,you can also claim deductions on that account in your return of income.

As for the tax treatment of the house that you own but have not occupied,the income tax law clearly states that where you own only one house but are unable to occupy it due to your employment in another city,and where you derive no other monetary benefit out of it (that is,no rental or any other income whatsoever),then you can claim the house as self-occupied (and not ‘let out’ or ‘deemed let out’). As such,the annual value of this house property will be taken as Nil. You can claim deduction on account of interest payment from this Nil value,thereby resulting in negative income which you can set-off against your salary income. The maximum deduction on this account allowed in a self-occupied property is limited to Rs 1.5 lakh per annum.

As for the principal repayment,you can claim it as deduction under section 80C subject to the limits prescribed therein.

I was allotted a plot in a housing society around four years back. I have not been able to build any house on the plot due to lack of funds. Of late,I have build a single room with toilet on the plot as one property dealer said that he could help me put the construction out on rent. As such,the construction is not habitable,but he has somehow found a tenant for this construction,who intends to use it as a grocery store. I would like to know how I should treat the rental income from this construction. Can a one-room construction without kitchen and other necessities be treated as house?

(Via Email)

Given the details of construction,I can agree with you that the house is inhabitable. However,the interpretation of a ‘house’ for income tax purposes is simpler and does not involve habitability. The courts have held a ‘construction with four walls and a roof’ as a house here. Therefore,even if you might consider the house as inhabitable,it is indeed a house property for tax purposes. Also,the purpose for which the tenant uses the house property is irrelevant here (for his own residence or for commercial purposes such as grocery store). As such,the income from this construction will be treated as your house property income,even if it does not have any kitchen,electricity or water supply and other necessary amenities. l

The author is a chartered accountant.Confused about the various types of home loans on offer? Send in your queries to:

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