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Tax implications for single property owners

08 February 2013

I am sole owner of a residential flat in city A and this is my only self-owned property. I am employed in city B and stay at my parent's house where I dont pay any rent to them or claim any HRA. What is the tax implication for my apartment in city A from a house property perspective?

If I keep it vacant can I avoid paying any income tax? If not what is the way to minimize tax outgo?
If I rent it out, what is the way to minimize the tax payable?
I recently got married and am planning to start a HUF. Can I transfer this flat to the newly formed HUF or to my wife's name?

Thanks for your advice

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3 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 08 February 2013

You have not mentioned if you are owning more than one property. If you are the owner of only one property, then you need not worry about the tax implications, as in cas of self-occupied property, there are not tax implications provided that you have not taken any laon for the property. If you have any laon for the property then you can get teh deductin of interest paid on home laon taken from your taxable income.

1. if you rent the property, then your income frm huose property would get added in your total taxable income. However from the rent recd you can claim deduction for property tax paid and on the balance yuo can claim 30% std deductino towards maintenance & repairs. If there's a loan then you can claim the netire interest paid on the loan from the balance amt.

2. as explained above.

3. if you transfer the property wihtout adequate consideration to your wife or HUF then the income would get clubbed in your hands.

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C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 08 February 2013

The replies are pointwise as under:

If I keep it vacant can I avoid paying any income tax?

No Income can be deemed in your hands as you have only one house. The same will remain Self Occupied till you own a second house.

If I rent it out, what is the way to minimize the tax payable?

If you rent it out, then you get a deduction of municipal tax paid and 30% standard deduction. Further interest is also allowed as deduction but for that you should have a loan against that house property. The way to save tax is as under:

The other option is you pay rent to your parents and claim HRA exemption.

I recently got married and am planning to start a HUF. Can I transfer this flat to the newly formed HUF or to my wife's name?

There is no need to transfer the property in HUF as you only own one house which is not rented. If you plan to buy another house then buy it in HUF.

If you rent out your own house then it is better to transfer to HUF so there are two taxable entities i.e. you and HUF.

In case you need any further clarification, feel free to ask.

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