Good Morning Mahesh Ji
You can't do this practice it's evasion of tax not planning of tax
As per act if u use both houses than only u have option to show any one house as self occupied and other one as deemed let out
Can self occupied property be shown as let out property
hi consultant, Presently I am living an apartment owned by me. I've recently purchased another apartment (under construction) for which I've taken home loan. I am planning to move in to the new apartment in FY 2017. I understand from reading online articles that there is no limit on claiming the home loan interest paid on let out property. In my case once I move to my new apartment, I'll rent out the old apartment. But the old apartment doesn't have any loan on it. Does the income tax law allow me to show my new apartment where I am staying as let out property so that I can avail maximum tax benefit? thanks --mahesh n
Asked 8 years ago in Income Tax
Thanks Lalit Bansal for your quick and clear response. Now that I understand this, I would like to bring down the home loan interest for the new apartment by selling a residential plot that I own and use the amount received to do a part payment towards the loan. In this case will there be any capital gains tax levied for the plot sale? Thanks again --mahesh n
Asked 8 years ago
Hi Mr. Mahesh,
If you want to claim full Housing Loan benefit by self-occupying the new House, you can do so by keeping the old house vacant. If you keep the old house vacant, then the old house has to be shown as self-occupied and new house as deemed let-out. But if you let out the old house, then you have to show that house as let-out and pay tax on the net annual value (After claiming deductions for property tax and 30% standard deduction).
If you sell the residential plot, then there will be Capital Gain. But you can't claim any Capital Gain Deductions if the same is utilized to pre-pay existing housing loan
Thanks Pradeep Bhat. Are there ways to avoid capital gains tax for plot sale? For the deemed to let out property is there any additional tax like wealth tax? I am reading new items that wealth tax has been removed from AY 16-17 onwards. Thanks --mahesh n
Asked 8 years ago
Hi,
Yes. Wealth Tax has been abolished. So, no need to worry from that view point. But you will have to declare all your Assets and Liabilities in Schedule AL in your IT Returns if your Taxable Income exceeds Rs. 50 Lkahs.
Regarding Capital Gain Tax on plot sale, you can avoid the same only if it is Long-term Capital Gain (Property held for 36 Months or more before selling the same). Since you already own 2 houses, you are not eligible for Section 54F benefit. However, you can still save Capital Gain Tax by investing the Capital Gain amount (Up to a Maximum of Rs. 50 Lakhs) in Capital Gain Bonds u/s 54EC within 6 months from the date of sale. These Bonds are issued by either NHAI or REC.
Note: In such a case, you will have to pay Tax only on the Interest earned from such Bonds. You are free to close the Bond by withdrawing the amount after the lock-in period
Its addressed to other experts. I am passing it over.
Sir no you cannot claim interest paid on New Apartment and adjust that against old house rent.
Yes you can sell the plot and invest in new property , but the same need to be done within one year of the purchase.
Wealth Tax is abolished.
Hello Mahesh,
Yes, you may show the new flat as deemed to be let out property.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Hello Sir,
Long Term Capital Gain shall be charged if your plot is more than 3 years old or else it will be Short Term Capital Gain.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Dear Sir,
If the date of purchase of your new house property is less 365 days from the sale of plot, then you can set off the gain against the purchase of flat. If in case, it is more than 365 days old then you shall have to invest the proceeds in a Capital Gain Scheme.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Dear Mahesh
No, in your case it is not allowed to show your self occupied home as a let out property.
Please feel free to revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
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