Janet Mason 
The interim budget 2019 had many announcements that can directly affect the man or woman taxpayer. One of the measures announced became the proposal to exempt the levy of tax on notional or deemed lease from a 2nd residence assets. While making the assertion, Piyush Goyal, in his finance speech, stated, “Currently, profits tax on a notional lease is payable if one has more than one self-occupied residence. Considering the problem of the middle magnificence having to preserve families at locations because of their task, schooling, care of mother and father, and so on. I am presenting to exempt the levy of earnings tax on notional hire on a 2nd self-occupied house.” According to the idea, a 2d residential property might be dealt with as a ‘Self-occupied property’ if it isn’t permitted. Out As in line with modern legal guidelines, a 2d house assets lying vacant (no longer let loose) or utilized by own family participants is deemed to be rented out, and tax must be paid on notional rent earned from this property. However, there’s no clarity among specialists on the applicability of this inspiration and, consequently, its tax implications.
One extra element that ought to be referred to is that while extending the gain of self-occupied belongings to a 2d residencFinanceces 2019 has also restricted the maximum amount of deduction claimed on the interest paid on housing loan. According to tax specialists, in line with the 2019 proposal, from FY 2019-20, the quantity of deduction available at the hobby paid at the housing mortgage for each self-occupied house has been confined to Rs 2 lakh. Previously, individuals having a second residence should claim the deduction for the hobby paid on the housing mortgage with no monetary limit. However, the full loss from the house belongings that could be set off became restricted to Rs 2 lakh in a monetary 12 months. Any unabsorbed loss that couldn’t be claimed within the current financial 12 months became allowed to be carried forward for eight evaluation years for set-off with future profits.
Post Budget 2019 proposals, as both houses can be treated as self-occupied. Therefore, any unabsorbed loss will no longer be allowed to be carried forward. The question now arises whether or not the second residence of a taxpayer might be mandatorily treated as self-occupied or can nonetheless be dealt with as deemed to be let loose, depending on whether or not the conditions for being termed as ‘self-occupied as per section 23(2) are met or not. Chartered accountants have differing critiques in this regard. Chartered Accountant Naveen Wadhwa, DGM, Taxmann.Com, says, “A taxpayer’s 2d residence can nevertheless be considered as deemed to be set free if it does not meet any of the situations specified below Section 23(2) of the Income Tax Act.
As consistent with segment 23(2), the price of the house shall be taken as nil (i.E., the house is dealt with as self-occupied for tax functions) if the proprietor uses the said residence for his residential purpose, or it could not be occupied with the aid of the owner due to his employment, enterprise or profession at another area. He has to live in another area in a rented residence/, not owned by him. If any of the circumstances are happy via the character, then, if so, the second house might be handled as self-occupied property. However, this will additionally be interpreted as if the taxpayer has two homes. If no condition is happy as stated in Section 23(2) in appreciation of the second one house, then the second residence shall be considered as deemed to allow-out property.”
Corroborating his views, Shalini Jain, Tax Partner, People Advisory Services, EY India, says, “The Interim Budget 2019 seeks to provide alleviation to the category of taxpayers who are required to pay tax on second residence belongings that are either utilized by mother and father to live in or lying vacant. Those taxpayers will now not pay tax on notional rent on the second property if it qualifies as a self-occupied residence property according to Section 23(2) of the Income-tax Act, 1961. According to the provisions of this phase, house belongings may be considered as self-occupied only if the house assets are occupied by the taxpayer for his house, or it cannot be occupied by the taxpayer due to his employment, business, or career in some other place. He needed to live in that different location in a asset that he doesn’t always own.
Hence, if both of the situations aren’t pleased for assets that aren’t rented out, such house assets might not be taken into consideration as self-occupied – it might be considered as deemed to be set free. However, if both of the two conditions are satisfied, the taxpayer will mandatorily be required to reveal each of the homes as self-occupied and would not have a choice to recollect both of the homes as deemed to be set free.” Jain further explains this with an example. “Suppose Mr. A owns a residence in Delhi that is occupied by his family. Mr. A is working in Mumbai, living in every other house, which is also owned by him. Mr. A can declare the most effective one-house assets as a gift, as the self-occupied and notional lease is taxable for the second house assets. Now, as in step with the proposed provisions, Mr. A may consider both homes as self-occupied.
However, the proposed provisions shall be beneficial if homes are received from their own resources, and there may be no expenditure resulting from a hobby on housing loan, or if the annual market rent (the cost at which property is anticipated to be let out) is higher than the amount of general interest expenditure. This is because the hobby deduction issue of Rs 2 lakh, which currently applies tothe best one self-occupied residence belongings, will henceforth apply to each self-occupied house.” Taking an extraordinary view, Abhishek Soni, CEO, Tax2win.
In a tax-filing company, it says, “Currently, if any assessee owns more than one residence, then the provisions of notional hire apply even on the second vacant house or house occupied via, say, mother and father. As per the proposals of the Interim Budget 2019, the provisions of notional hire on the second residence will not be relevant. However, going through the wording utilized in Section 23 (2) of the Income Tax Act, 1961, the second house additionally should be used by the assessee for his own house. Now, the query arises whether or not both houses need to be used for their wn residences to declare the benefit of modification, or maybe characterize the usage of one house for its own residence, the other house, lying vacant, could be handled as self-occupied.
As this grey location could lead to litigation inside the destination, we’re looking forward to explaining this difficulty by using the CBDT. However, if an individual desires to keep away from litigation with the earnings tax department, they ought to deal with the second house as self-occupied property.” Practicing Accountant Sachin Vasudeva says, “As in keeping with the price range proposals, it’s far clear that people do no longer have any desire in treating their 2d house property as deemed to let loose. From FY 2019-20, the second residence assets might be handled as self-occupied belongings only if it is vacant. No tax could be payable on the premise of the notional hire on such residence if that house is not let out, i.e., . Lying vacant at some point of the monetary 12 months or either occupied by your family, say your parents.”
Chetan Chandak, Head of Tax Research, H&R Block India, says, “From the finance proposals, it isn’t always clear whether or not a person will be able to declare the second house as deemed to let-out if the two situations indexed in section 23(2) aren’t met. Individuals should understand that if the second house is dealt with as self-occupied assets, then the interest deduction to be had on housing mortgage under section 24 for both homes can be confined to the mixture of Rs 2 lakh. This will lessen the possible tax advantage in the future from the carry-forward of carried losses. And in the absence of absolute clarity as to whether or not you will declare the other residence as deemed to be let out, the tax officer can also try to restrict the interest deduction under section 24 to Rs 2 lakh for both houses. Prepare.”
