CLARIFICATION ON INCOME TAX LIABILITY ON RENTAL INCOME

Sir, I had purchased a residential building 2 years back that is in 2012. It comprises 4 portions. 1 portion occupied by me. One portion let out. Another 2 portions were on lease (rent free) for Rs.20,00,000 (Rs.10,00,000 for each portion) already received by the seller from the tenants. I adjusted Rs.20,00,000/- from the sale value and I have duly shown the same in the Sale Deed and registered the Sale Deed for the full sale value including the lease amount of Rs.20,00,000/- I did not take any home loan at the time of acquiring the residential building. However In 2014 , when the lease period of the 2 portions came to an end I approached the bank for a home loan with a view of settling Rs.20,00,000/- to the tenants, I was denied home loan on the ground that home loan cannot be granted after purchase of the property. As such I had taken Property Loan(Loan against Property) for Rs.20,00,000 at 12.75% interest rate. My EMI for 7 years is Rs.36113/- per month. Annual principal repayment is Rs.1,90,152 and interest repayment is Rs,244,199/- At present the 2 portions are kept vacant and I do not want to let it out since I intend to sell the residential building after 1 year as I have to complete 3 years from the date of purchase to avoid short terms capital gain tax. I need following clarifications: 1. I learn that income tax have to be paid on the expected market rent of the 2nd house even if the house is not let out. Can you kindly clarify as to why we have to pay income tax on the notional rental income when in the first instance we do not receive any rental income? Besides from what source of income we will be in a position to pay income tax on the assumed rental income not received by us? 2. Are the other portions of residential houses in the same residential building considered as a 2nd house, 3rd house and fourth house for the purpose of Income Tax rules? 3. Am I eligible for deduction of interest under section 24 from the annual rent received/receivable and can I deduct interest amount of Rs.1,90,152/- paid towards Loan against Property? BHARATH KUMAR

asked Jan 20 '15 at 23:54 by BHARATH KUMAR 11


  1. As people can accept rent in cash and not show rental income at all, government has made it mandatory to show rental income even in case house is not on rent. There assumption is that, why would a person keep a house vacant if he not living in it.
  2. Yes, in case they are sold as different house properties, they would be considered as separate property.
  3. No, as loan is not a home loan, section 24 eligibility won't be applicable.

answered Jan 25 '15 at 08:52 by pankaj 5.2k320

link

Know someone who can answer? Share a link to this question via email, twitter , or facebook
.

Your answer
toggle preview

Follow this question

Once you sign in you will be able to subscribe for any updates here

Markdown Basics

  • *italic* or __italic__
  • **bold** or __bold__
  • link:[text](http://url.com/ "title")
  • image?![alt text](/path/img.jpg "title")
  • numbered list: 1. Foo 2. Bar
  • to add a line break simply add two spaces to where you would like the new line to be.
  • basic HTML tags are also supported

Tags:

×777

Asked: Jan 20 '15 at 23:54

Seen: 1,516 times

Last updated: Jan 25 '15 at 08:52