Hi,
I already own a house in Mumbai and am in the process of obtaining another in Pune (near to my workplace). The reason for getting a second home is twofold: I want a place of my own to be able to live comfortably in Pune and given the appreciation of property, it also serves as a suitable investment option. Thus, I'd like to know the Income and Wealth tax liability that comes with this purchase. Here are the relevant details:
Mumbai Home: Date of Purchase (Registration): Feb 2006 Agreement Value: Approx. Rs. 12 Lakhs Home Loan: 7 lakhs for 7 years Loan started: Feb 2006 Loan ended: Mar 2009 (foreclosed) Current Status: Not Occupied; possession not yet provided by the builder.
Pune Home: Date of Purchase (Registration): May 2012 (tentative) Agreement Value: Approx. Rs. 60 Lakhs Home Loan: 10 lakhs for 10 years (tentative) Loan started: N/A Loan ended: N/A Current Status: Property is ready for possession; will take over as soon as I clear the dues.
From what I've researched so far, the liabilities seem to be as follows (please confirm if these are correct):
Income Tax: 1. The "second" house is liable to be taxed as a rental property at the prevailing market rates (even if I may not decide to let it out on rent). 2. If I let it out on rent (which I'd prefer not), then I will be required to pay tax on the rental income. 3. I can claim tax exemption upto Rs. 1.5 Lakhs for the home loan (for Pune home).
Wealth Tax: 1. Given that the implementation of Direct Tax Code 2012 has been postponed (source: pankajbatra.com), the "second" house will incur a wealth tax of 1% if it's value is over 30 Lakhs. 2. If I let the "second" house on rent (for a minimum of 300 days), then I will not be liable for wealth tax. 3. If Pune is considered to be the "second" house, then the wealth tax liability will be on 60 - 30 (standard deduction) - 10 (Home Loan) = 20 Lakhs; 1% of which equates to Rs. 20,000/- per annum.
A few more specific questions: 1. Do I have the liberty to designate my Mumbai home as the "second" house ? Or will the Pune property will have to be considered the "second" house because it was purchased later ? 2. If Mumbai home can be considered the "second" house, will it's agreement value be considered for the wealth tax calculations ? Or will it's "current/market" value be considered ? If so, how do I calculate the same ?
Thanks.
