Does Budget 2019 make 2nd residence mandatorily ‘self-occupied’? Experts vary

The meantime price range 2019 had many bulletins that can at once impact the individual taxpayer. One of the measures announced turned into the idea to exempt levy of tax on notional or deemed rent from second house property. While making the assertion, Piyush Goyal, in his budget speech, said, “Currently, income tax on notional hire is payable if one has a couple of self-occupied residences. Considering the problem of the center class having to preserve households at places due to their task, children’s education, care of dad and mom and many others. I am featuring to exempt levy of income tax on notional hire on a 2nd self-occupied residence.” As per the idea, a 2nd residence property can be treated as ‘Self-occupied belongings’ if it isn’t always allow-out. As consistent with present-day laws, a 2nd house asset lying vacant (now not set free) or utilized by own family individuals is considered as deemed to be rented out, and tax must be paid on notional hire earned from these belongings.

However, there’s no readability among professionals at the applicability of this concept and, therefore, its tax implications. One extra thing that has to be stated is that at the same time as extending the advantage of self-occupied belongings to a 2d residence, finances 2019 has also confined the most quantity of deduction that may be claimed on the hobby paid on housing mortgage. According to tax professionals, according to intervening time price range 2019 proposals, from FY 2019-20, the amount of deduction available at the interest paid at the housing mortgage for both the self-occupied homes has been limited to Rs 2 lakh. Previously, individuals with a 2d house may want to deduct the hobby paid on the housing mortgage with no financial restriction.

However, the total loss from the house belongings that might be activate turned into limited to Rs 2 lakh in a monetary 12 months. Any unabsorbed loss which could not be claimed inside the existing economic year becomes allowed to be carried forward for eight evaluation years for set-off with future income. Post Budget 2019 proposals, as each of the homes, can be treated as self-occupied. Consequently, any unabsorbed loss will not be allowed to be carried forward. The query now arises that whether or not the second one house of a taxpayer can be mandatorily dealt with as self-occupied or can still be treated as deemed to be let loose relying on whether or not conditions for being termed as ‘self-occupied as per section 23(2) are met or now not. Chartered accountants have differing opinions in this regard. Chartered Accountant Naveen Wadhwa, DGM, Taxmann.Com, says, “A taxpayer’s second residence can still be considered as deemed to be let out if it does not meet any of the conditions designated below Section 23(2) of the Income Tax Act.

As per section 23(2), the cost of the house shall be taken as nil (i.E., the residence is handled as self-occupied for tax functions) if the proprietor utilizes the stated residence for his residential purpose or it could not be occupied via the owner because of his employment, commercial enterprise or profession at some other region and he has to reside at such other location in a rented house/house no longer owned with the aid of him. If any of the conditions is satisfied via the character, then, if so, the second house will be dealt with as self-occupied property. However, this could also be interpreted as though the taxpayer has two homes. If no circumstance is happy as referred to in Section 23(2) in recognizing the second residence, then the second house shall be taken into consideration as deemed to let-out assets.” Corroborating his views, Shalini Jain, Tax Partner, People Advisory Services, EY India, says,

“The Interim Budget 2019 seeks to provide a remedy to the class of taxpayers who’re required to pay tax on second house property that’s both utilized by parents to stay in or lying vacant. Those taxpayers will no longer need to pay tax on notional rent on the second one assets if it qualifies as self-occupied house assets as consistent with Section 23(2) of the Income-tax Act, 1961. As in step with the provisions of this phase, a house property may be considered as self-occupied handiest if the residential property is occupied via the taxpayer for his house, or it couldn’t be occupied by using the taxpayer due to his employment, business, or career in some other vicinity. He had to reside in that different area in a belonging which isn’t always owned via him.

Hence, if either of the situations is not satisfied for an asset that isn’t always rented out, such residence property could no longer be taken into consideration as self-occupied – it would be considered as deemed to be set free. However, if either of the two conditions is glad, the taxpayer will mandatorily be required to disclose each the homes as self-occupied and would no longer have an option to recollect both of the houses as deemed to be let loose.” Jain similarly explains this with an instance. “Suppose Mr. A owns a house in Delhi which is occupied by using his own family. Mr. A is working in Mumbai, dwelling in another residence which he also owns. At present, Mr. A can claim the best one house assets as the self-occupied and notional lease is taxable for the second one residential property.

Now, as consistent with the proposed provisions, Mr. A may be capable of recollect both the houses as self-occupied. However, the proposed provisions shall be beneficial if homes are obtained from own assets, and there may be constrained, or no expenditure attributable to interest on housing mortgage or if the yearly market rent (the price at which assets is expected to be let loose) is better than the quantity of usual hobby expenditure. This is because the hobby deduction problem of Rs 2 lakh which currently applies to simplest one self-occupied house belongings will henceforth observe to both self-occupied residences collectively.” Taking an exclusive view, Abhishek Soni, CEO, Tax2win.In, a tax-filing company says, “Currently, if an assessee owns a couple of residences, then the provisions of notional rent observe even on the second one vacant house or residence occupied with the aid of, say, parents.