HOME SWEET HOME: Taxpayer cannot save tax by investing in two houses if capital gains is from asset other than house
This Interim Budget has proposed various provisions that are beneficial for property owners. Let us discuss what these are and their impact.
Enhancement for limit on TDS on rent
The finance minister has proposed to enhance the threshold limit for receipt of rental income without deduction of tax at source (TDS) on such income. Presently, a lessee is required to deduct tax at source if the annual rent in respect of a property exceeds Rs 1.80 lakh in a year. Now property owners will be able to get the rent without deduction of TDS as long as the rent does not exceed Rs 2.40 lakh in a year.
The lessee, other than Hindu Undivided Family (HUF) and individuals, have to deduct tax at source in all such cases where the rental exceed specified limits. An individual or HUF also has to deduct tax from rent in case the annual rental exceeds the threshold limit, in case they are engaged in business and their accounts were required to be audited under income tax laws during the preceding year.
More self-occupied houses
Presently, if you own and occupy more than one house, you have an option to choose any one of the houses as self-occupied and the rest of the house/s are treated as deemed to have been let out.
In respect of such deemed to have been let out house properties, you are required to offer notional rent, which the property might fetch in the market, for taxation even though you have in fact not received any rent on such property. This situation may arise due to various reasons like you having a house in your native place, which is not let out. Likewise, your additional house/s may be used by other family members for which you do not get any rent. Such cases have been causing hardship in genuine cases where the owner has to pay tax on the income which is never received.
In order to provide relief for such cases the FM has proposed to allow a taxpayer to have two owned houses as self-occupied, instead of one house being allowed presently. Presently, you are allowed to claim interest up to Rs 2 lakh for home loan in respect of one such self- owned and self-occupied house. However, while proposing the amendment the FM has retained the limit of Rs 2 lakh of interest which one can claim either for one self-occupied house.
Long-term capital gains on sale of house
Presently an individual or an HUF can claim exemption under Section 54 of the Income Tax Act, if you invest the indexed long-term capital gains arising on sale of a residential house for purchase or construction of one house within the time limits prescribed. In order to provide relief to large families who may feel the need to buy more properties, the FM has proposed to expand the benefit for buying or constructing one or two residential houses provided such LTCG does not exceed Rs 2 crore.
This option can only be exercised once in a life time and for all subsequent transactions of sale of residential houses, you will be entitled to claim this exemption under Section 54 only if you make investments in one house. Additionally, one can claim the exemption from LTCG on sale of a long-term capital asset other than a residential house if the investment is made in one house Section 54F. The option to invest in two houses is not extended for exemption under Section 54F. The interim budget has shown soft corner for property owners and has extended good benefits to them.
The writer is tax and investment expert
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