Income from house property

This query is : Resolved

mangesh kurup (Querist)
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02 September 2015 If I own two houses, one is without a loan and one with home loan and I am staying on rent in other area claiming HRA deduction from company. In first house, parents are staying and second is vacant.

Queries:

1. Which ITR (ITR-1 or ITR-2) is applicable in this case?
2. Can I fill ITR-1 as I do not have any loan on first house?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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02 September 2015 First house, no loan, parent staying. Treat as self occupied, no income therefrom.

Second house, vacant, loan availed. It is to be treated as 'deemed to be let out' and income therefrom has to be computed.

As such, you have only income from one house, therefore, ITR-1 will suffice.

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mangesh kurup

mangesh kurup (Querist)
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02 September 2015 Thank you Sir. One clarification. If it has to be treated as "Deemed Let out", then at what rate the rent will be calculated? Is it that I will consider something or IT dept will calculate it on some basis? In this case, the limit of Rs. 2 lacs interest exemption is valid or not? Do I have to submit any proof? Can I consider the Society maintenance charges as Municipal taxes as the charges to Govt. bodies are paid by society?

Please help.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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29 July 2024 Given your situation involving two houses, here’s how you should handle the income from house property and related queries:

### 1. Which ITR Form is Applicable?

- **ITR-1**: This form is typically used for individuals with income from salary, one house property, and other sources like interest. However, ITR-1 is not suitable if you own more than one house property or if you need to report income from house property under different scenarios (e.g., deemed let-out property).

- **ITR-2**: This form is applicable if you have income from more than one house property. Given that you own two houses and have a situation involving deemed let-out property, ITR-2 is the appropriate form for you.

### 2. Can You Use ITR-1?

You **cannot** use ITR-1 because:
- ITR-1 does not accommodate the reporting of income from more than one house property.
- ITR-2 is needed to report income from multiple house properties, especially when dealing with deemed let-out properties.

### 3. Handling Deemed Let-Out Property

**Deemed Let-Out Property**:
- **Deemed Let-Out**: If one of your properties is not occupied by you or your family members and is vacant, it will be treated as deemed let-out. In such cases, the income from the property will be calculated as if it were let out.

**Calculation of Rental Income**:
- **Fair Market Value (FMV)**: For deemed let-out properties, you need to compute the rental income based on the Fair Market Value (FMV) of the property or the actual rent received if the property were let out, whichever is higher.
- **Gross Annual Value (GAV)**: This is the higher of FMV or the actual rent that the property could fetch.

**Interest Deduction**:
- **Section 24(b)**: The interest on home loan for a self-occupied property (or deemed let-out property) is deductible up to ₹2 lakhs under Section 24(b). This limit applies irrespective of whether the property is self-occupied or deemed let-out.

### 4. Proof and Documentation

- **Proof of Interest Payment**: You should keep proof of interest payment on the home loan, such as interest certificates from the bank.
- **Municipal Taxes**: The deduction for municipal taxes paid should be based on actual taxes paid to the local authority. Society maintenance charges are generally not considered municipal taxes. If you are unsure, you should consult a tax professional to clarify what can be claimed.

### Summary of Points:

1. **ITR Form**: Use **ITR-2** because you own more than one house property and need to report rental income and claim deductions.
2. **Deemed Let-Out Property**: The rental income is based on FMV or actual rent, whichever is higher.
3. **Interest Deduction**: You can claim up to ₹2 lakhs as interest deduction under Section 24(b) for the home loan.
4. **Proof**: Maintain all proofs for interest payments and municipal taxes. Society maintenance charges are generally not considered municipal taxes.

By following these guidelines, you can accurately report your income from house property and make appropriate claims. If you need further assistance or clarification, consider consulting a tax professional to ensure compliance and correct filing.