ILLUSTRATION FOR SELF OCCUPIED PROPERTY

ILLUSTRATION: 

THIS ILLUSTRATION IS TO BE APPLIED IN A SITUATION WHERE FOLLOWING CONDITIONS CO-EXIST:

1. Wherein the assessee has two or more properties and all of them have been self occupied by him/ her for Residential purposes;

2. The assessee as per Income Tax law can declare any one property of his/ her choice as "SELF OCCUPIED" out of all such house properties, rest all properties though Self Occupied during any part of the year will be considered as "DEEMED TO BE LET OUT PROPERTIES" wherein the assessee will have to pay tax on Deemed income calculated on such House properties.

3. In case if any of the Physically Self Occupied House Properties are let out even for a single day in the previous year then such house property cannot be considered for Computation of which property to be declared as Self Occupied House property.

4. In case if a situation as explained in point 3 supra happens, then GAV of such property which was partly let out during the year and partly Self occupied/ Vacant in the Previous year will be calculated as if the property was let out for the whole year on a constant basis. However due consideration will be given for Vacancy loss if such property is not Self occupied for residual part of the year.

Click here to understand this point with the help of a Practical Example.

Case Study 

Mr. S owns the following house properties during the Previous Year 2007-08 (Assessment Year 2008-09). All house properties are Self Occupied by Mr. S during the Previous Year, subject to satisfaction of the conditions explained above: 

(Rs. in Thousands)

* The loan has been borrowed for the Construction of the House property after 1st April' 1999 and it includes only Post construction period interest.

Solution  

Here the assessee has the Option to declare any property of his choice as SELF OCCUPIED, wherein remaining properties will be considered as DEEMED TO BE LET OUT as per the provisions of the Income Tax Act' 1961.
Hence here we will analyze as to which property out of all three should be declared as SELF OCCUPIED so that lowest Income from House property is taxed in the hands of the assessee. 
Each house will be taken as SELF OCCUPIED and the relevant analysis be made accordingly.

OPTION I: House Property A considered as SELF OCCUPIED & House Properties B and C as DEEMED TO BE LET OUT

COMPUTATION OF INCOME FROM HOUSE PROPERTY

(Rs. in Thousands)

OPTION II: House Property B considered as SELF OCCUPIED & House Properties A and C as DEEMED TO BE LET OUT 

COMPUTATION OF INCOME FROM HOUSE PROPERTY

(Rs. in Thousands)

OPTION III: House Property C considered as SELF OCCUPIED & House Properties A and B as DEEMED TO BE LET OUT

COMPUTATION OF INCOME FROM HOUSE PROPERTY

(Rs. in Thousands)

CONCLUSION:  

OPTION II is the best Option available since House Property Income in this case comes to the least amongst all the Three Options analyzed here, hence the assessee Mr. S should declare Property B as SELF OCCUPIED wherein Properties A & C will be considered as DEEMED TO BE LET OUT PROPERTIES

NOTES:

• The Insurance Expenses and Whitewashing Expenses incurred by the assessee are not allowable since the Income Tax Act allows a Standard Deduction @ 30% of Net Annual Value of the House Property for all such types of expenses incurred irrespective of the individuality of such expenses;
• Interest on Borrowed Capital is a deductible expenditure even in case of a Self Occupied House Property as per provisions of Section 24(b) of the Income Tax Act' 1961.
• Since the Loan for construction of House Property is taken after 1st April' 1999, Rs. 1,50,000/- is the applicable limit in case of respective properties being declared as SELF OCCUPIED.