The Income Tax Appellate Tribunal (ITAT) of Mumbai (ITAT) in a recent decision has advocated the right of a taxpayer to change his selection of a house property that would be treated as self-occupied and having a ‘nil’ annual value. Accordingly, the estimated rent from such a house will not be taxable.
In simpler words, it can be understood in a way that if the taxpayer declares any out of his two properties as self-occupied one during declaration of Income tax return, he can at later stage, can change it with another property with a higher price during the actual tax assessment. With this, it may be possible to reduce the notional rent and hence lower the I-T outgo.
Until now, an individual who owns more than two houses can treat only any one of the house as ‘self-occupied and having a nil annual value’ as per the IT act. On the other hand, the other property, are assumed to have been let out and I-T is payable on the notional rent, even if they are not given out on rent. To save tax, certain deductions such as municipal taxes are permitted. Apart from this, a standard deduction of 30% is allowed while I-T is payable on the balance component.
In order to save the tax outgo, taxpayers has the only option to choose that house which would otherwise have had the highest adjusted annual value as ‘self-occupied.
According to tax expert, “It is high time the government reconsiders this taxation of deemed income. With housing finance being so readily available now, it is not only the rich people who have more than one house.”
They further said that this move will definitely help many tax payers who have multiple properties.