Dec 31, 2009

Fraudulent E-mails in the name of Income Tax Department

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Fraudulent E-mails in the name of Income Tax Department
No.402/92/2006-MC (23 of 2009)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated the 6th October 2009
PRESS RELEASE
Information has been received from several quarters that people are receiving electronic
mails informing them of their income-tax refunds and seeking their credit card details. The email
is sent from the following or similar mailing addresses –
or
It is clarified that the Income Tax Department does not send e-mails regarding refunds
and does not seek any information regarding credit cards of taxpayers.
Taxpayers are, therefore, cautioned that they should not respond to such mails and if they
do so it would be at their risk and responsibility.

Dec 30, 2009

Perquisite Valuation rules not considered the inflation and old exempt amount limit been kept

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Perquisite Valuation rules not considered the inflation and old exempt amount limit been kept
 The fringe benefit tax (FBT) was strongly opposed by India Inc, but there is no doubt that it was beneficial to the employees — they did not have to directly bear the tax on many perquisites. The repeal of FBT meant uncertainty on taxation of perks. Thankfully, there are few changes to the valuation rules when compared to the rules that existed prior to the introduction of FBT.
Rule 2BB, which deals with taxability of allowances, remains unchanged. If we take an overall view on employee benefits and allowances, a few items merit attention and this article will discuss them with the hope that they will be taken note of.

The taxable values for provision of an automobile including the cost of its running and maintenance, and driver is nil if the car is used purely for official purpose. However, if the employer allows mixed use, the rule provides for deemed values towards personal use.
These values have raised by 50% (there is also an apparent typo in one clause that may be rectified soon). Given that the earlier values were set many years ago, an enhancement of the limit accounting for the increase in fuel prices is justified.
However, price increase is not limited to fuel only, prices have increased on many other household expenditure as well such as school fees, food, local transportation etc for which the exemption limits have not been raised. The exemption for transport allowance under Rule 2BB remains unchanged at Rs 800 per month although the limits for this allowance was raised by the Sixth Pay Commission (SPC) or government employees. A 50% increase is merited here as well.
Education allowance for children continues to be a measly Rs 100 per month while the entitlement under the SPC is a princely Rs 1,000 per month with an additional Rs 3,000 per month as hostel subsidy. With education being a key concern, a higher limits would be welcome.
Now consider the case of meals provided by an employer during working hours. This is a benefit that is statutorily provided to factory workers and generally provided in many other establishments as well. There are enough studies that show the positive co-relation between wholesome meals and worker productivity and, during the FBT regime, the entire expenses were exempted.
Sadly, the old limit of Rs 50 per meal, set eight years ago, is now back. With food prices surging, what kind of meal would Rs 50 fetch at a restaurant or cafeteria in cities where most of the employee population resides? If a limit is required to prevent misuse, a cap of Rs 100-125 per meal would be reasonable without adversely impacting the government’s coffers.
Prior to the introduction of FBT, employee share plans were taxed as perquisites unless the share plans conformed to a set of prescribed guidelines. This allowed employees to defer their taxation to the point when they actually sold the shares and realised gains.
With the phaseout of FBT, share plans are again taxable in the employee’s hands but without the earlier shelter of deferment. This means the employees will now be subject to tax on the date of exercise (in the case of stock options) even if he does not have the liquidity to pay the tax.
Share plans generally have an expiry date and employees cannot defer the exercise indefinitely. Employees will thus be forced to simultaneously exercise and sell shares to generate funds to pay the tax. Employees of unlisted companies would face a bigger problem as they cannot sell these shares.
The prescribed valuation methodology is a rehash of what was prescribed under FBT, and again seems to ignore the fact that many employee share plans are not stock options and do not have an ‘exercise’ event. It would be better to reinstate the earlier scheme of exempting share plans that conform to prescribed guidelines.
Other provisions like credit cards and club memberships require the employer to maintain precise details and there could be difficulty in getting that after nine months.
The government has also not clarified what should be done with FBT that has been paid in advance. Companies should immediately file for refund, as this tax is no longer collectible under law but some clear guidelines would clear the air on this issue. In summary, the perquisite rules are welcome and we hope some of the remaining issues are dealt with expeditiously.

In case of gifted Assets, indexation benefit is available from the year of acquisition of the previous owner

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In case of gifted Assets, indexation benefit is available from the year of acquisition of the previous owner
This article summarizes a recent ruling of the Special Bench (SB) of the Mumbai Income Tax Appellate Tribunal (ITAT) [ITA No. 7315/Mum/2007] in the case of DCIT vs. Manjula Shah (Taxpayer) which held that, in the case of gifted capital asset, indexation benefit is available to a donee from the year of its acquisition by the previous owner. The SB adopted a purposive construction of the definition of ‘Indexed Cost of Acquisition’ (ICOA) by looking at the scheme of the Indian Tax Law (ITL), which seeks to grant the benefit of cost and holding period of the previous owner to the donee.
Background and facts of the case
·                                 As per the provisions of the ITL, profit or gains arising from the transfer of a capital asset, effected in a tax year, is computed by deducting Cost of Acquisition (COA) of the capital asset from the full value of the consideration, received or receivable. Where the asset is a long-term capital asset, i.e. held for more than 1 year for financial assets like shares, securities etc. and 3 years for other assets, the ITL permits deduction of the ICOA instead of the COA.
·                                 The ICOA is computed by enhancing the COA by cost inflation index (CII)[2], as per the following formula :
ICOA = COA x CII of the year of transfer
CII of the first year in which the asset was held by the taxpayer
[2] CII is notified every year on the basis of average rise in Consumer Price Index for urban non-manual employees.
·                                 In case of capital asset acquired by a taxpayer by way of a gift, the ITL provides that the COA of the previous owner is to be treated as that of the taxpayer. The holding period of the previous owner is also included in determining whether the asset is a long-term capital asset for the taxpayer.
·                                 The Taxpayer, an individual, earned long-term capital gains (LTCG) in the tax year 2003-04 (assessment year 2004-05) from the sale of residential flat in Mumbai. She had received the flat as a gift from her daughter (the donor) in the tax year 2002-03. The donor had purchased the flat in the tax year 1992-93.
·                                 There was no dispute that the gain was LTCG, as the flat was held for more than 3 years, considering the aggregate of the holding period of the donor and the Taxpayer.
·                                 The Taxpayer computed the LTCG, by calculating the ICOA applying the CII for 1992-93, being the year in which the flat was acquired by her daughter.
·                                 The Tax Authority, however, recomputed the LTCG, by applying the CII for 2002-03, being the year in which the flat was acquired by the Taxpayer under gift from her daughter.
·                                 Being aggrieved, the Taxpayer appealed to the first appellate authority who upheld the Taxpayer’s contention. The Tax Authority appealed further to the ITAT.
In view of conflicting rulings of different benches of the ITAT on the identical issue, an SB was constituted to adjudicate the issue in the case of the Taxpayer.
Contentions of the Taxpayer
·                                 In case of a capital asset acquired under gift, the ITL specifically provides for substitution of the COA of the previous owner and inclusion of the holding period of the previous owner, in the hands of the taxpayer. The definition of the ICOA refers to the first year in which the capital asset is held by the taxpayer. The holding by the taxpayer needs to be construed as inclusive of the holding period of the previous owner.
·                                 For the purpose of computing the LTCG, when the date of acquisition and the COA of the previous owner are treated as the date and cost of acquisition of the taxpayer, there is no reason or logic in not adopting the same while computing the ICOA.
Contentions of the Tax Authority
·                                 The definition of the ICOA under the ITL specifically provides that the benefit of indexation shall be available from the first year in which the capital asset was held by the taxpayer. The benefit of indexation would, therefore, be available only from the year in which the taxpayer becomes the owner of the asset. The definition of the ICOA is plain and clear and, hence, needs to be applied literally.
·                                 The inclusion of the holding period of the previous owner on the strength of the specific provision is for the limited purpose of determining whether the capital asset is a long term or a short-term capital asset. It has no relevance in the computation of the ICOA.
·                                 In the present case, the Taxpayer held the flat from the tax year 2002-03, being the year in which she received the flat as a gift from her daughter. Hence, the indexation benefit would be available from that year only.
Ruling of the SB
The SB ruled in favor of the Taxpayer and held that the Taxpayer was entitled to indexation benefit from the year of acquisition by the previous owner, for the following reasons:
·                                 The transfer of a capital asset under a gift is not charged to capital gains, in terms of the provisions of the ITL. However, where such an asset is subsequently transferred by the successor, the date of acquisition and the COA of the previous owner are adopted, for computing the capital gains in the hands of the successor. The capital gains, which would have been chargeable in the hands of the previous owner, is thereby shifted and made chargeable in the hands of the successor. This is the scheme of the ITL, as borne out by the relevant provisions.
·                                 The definition of holding period of capital asset, which provides for inclusion of the holding period of the previous owner in case of gifted asset, applies to all the provisions of the ITL and, hence, needs to be read into the definition of the ICOA as well. So, read contextually, in the definition of the ICOA, the reference to the first year in which the asset was held by the taxpayer needs to be construed as inclusive of the holding period of the previous owner.
·                                 The position adopted by the Tax Authority, based on literal interpretation, would result in denial of the benefit of indexation for the holding period of the previous owner. As explained in CBDT Circular No. 636 dated 31 August 1992, the current system of enhancing the COA by applying the CII is intended to grant relief from inflationary effect. The relief is linked to the holding period of the capital asset. Exclusion of the holding period by the previous owner, while computing capital gains in the hands of the successor, will lead to absurdity and an unjust result. The SB placed reliance on the ruling of the Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597) which held that literal interpretation, leading to absurdity, should be avoided.
·                                 Since the COA and the holding period of the previous owner are adopted for the computation of capital gains in the hands of the taxpayer, denial of the indexation benefit for the holding period of the previous owner does not stand to any reason or logic.
·                                 The SB preferred to adopt a rule of purposive construction, under which the words in the statute are interpreted in a manner in which they best harmonize with the subject matter of the enactment and the object of the legislature.

Dec 28, 2009

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4:41 PM 0
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EXCISE DUTY TREATMENT IN GST REGIME

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EXCISE DUTY TREATMENT IN GST REGIME

India may move to a dual Goods and Services Tax (GST) regime next year, but the Cenvat (excise duty) related exemptions, especially area-based ones, will not be withdrawn at one go for ushering in the new tax system. The Finance Ministry is not in favour of doing away with all the Central excise exemptions, numbering about 330, as part of the switchover to the GST regime.
The excise exemptions are only going to be “grandfathered” – brought down gradually – even if GST is ushered in earlier, a top Finance Ministry official said.
The official highlighted that India was a democracy and certain exemptions will have to be retained. A Task Force on GST appointed by the Thirteenth Finance Commission had in its recent report recommended that area-based exemptions in the case of Cenvat should not be continued under GST.
The Task Force had suggested that direct investment linked cash subsidy may be given, rather than area based exemptions, if it was considered necessary to provide support to industry for balanced regional development.
The task force report also highlighted that the case for providing area based exemption was extremely weakened in the face of its recommendation for sharp reduction on combined rates of CGST and SGST. A combined rate of 12 per cent (CGST and SGST) has been recommended by the Task Force in its report.
Currently, industries set up in the North East, Jammu and Kashmir, Sikkim, Uttarakhand and Himachal Pradesh enjoy exemption from payment of Cenvat.
The Task Force felt that area based exemptions created economic distortion and affected the economic viability of units located in non-exempt areas. They are prone to misuse and difficult to administer, the Task Force had said.
Threshold limit
Meanwhile, the Finance Ministry may favour a threshold limit that aligned with the proposed uniform State GST threshold of gross annual turnover of Rs 10 lakh both for goods and services.
The first discussion paper on GST, released by the Empowered Committee of State Finance Ministers on VAT, had proposed a uniform State GST threshold of gross annual turnover of Rs 10 lakh both for goods and services.
Currently, the threshold prescribed in different State VAT Acts, below which VAT is not applicable, varies from State to State.
For the Centre, the discussion paper suggested that the threshold for Central GST may be kept at Rs 1.5 crore and the threshold for Central GST for services may also be appropriately high.
The current thinking in the Central Board of Excise and Customs (CBEC) is that the threshold of Rs 1.5 crore proposed for goods was on the higher side. Having a threshold of Rs 1.5 crore for goods may shrink the tax base and thereby the revenue neutral rate may go up, official sources said.
The Finance Ministry is also not keen on having separate threshold limits for goods and services. “It is difficult to have two separate threshold limits,” official sources said.

DATE OF ROLLING OUT GST WILL BE DECIDE ON JAN. 8

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DATE OF ROLLING OUT GST WILL BE DECIDE ON JAN. 8

The date for rolling out the Goods and Services Tax could be announced on January 8, the Chairman of the Empowered Committee on State Finance Ministers, Asim Dasgupta, said today.  “There will be a joint statement after a meeting with Finance minister Pranab Mukherjee on January 8 on GST rollout,” Dasgupta told reporters on the sidelines of the 23rd industrial trade fair, organised by the Bengal National Chamber of Commerce and Industry here.
“We (state finance ministers) have a two-day meeting from January 7. We will meet Pranab Mukherjee before giving a statement on this,” he said.

Dasgupta’s statement came just a day after the Union finance minister said the scheduled April 1 date to introduce the new tax regime may be missed due to a lack of consensus among all the 28 states.

Dec 27, 2009

IS TDS ON CMMISSION OF TRAVEL AGENTS OF FOREIGN AIRLINES VAILD

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IS TDS ON CMMISSION OF TRAVEL AGENTS OF FOREIGN AIRLINES VAILD
The Supreme Court would decide whether foreign airlines are liable to deduct tax at source (TDS) on commissions paid to travel agents for rendering ticketing services. The issue for consideration before the apex court is if airlines would have to deduct TDS on the difference between the full value of tickets and the concessional tickets issued to their travel agents.
The question has been raised by the income tax department before a Bench headed by Justice SH Kapadia, which has sought reply from international airlines British Airways as to why it failed to deduct TDS on such amounts.
The department had challenged the Delhi High Court judgement that held that the difference between the full value of the tickets and the concessional tickets issued by airlines is not an income in terms of Section 194H of the Income Tax Act, 1961, and hence the carriers are liable to make such deductions on such differential amounts.
The high court verdict had come on batch of petitions filed by the department against various airlines—Air India, Lufthansa German Airlines, Air France, Kuwait Airways Corporation, United Airlines and others. The high court had also held that since the airlines had no obligation to deduct TDS on such notional commission, which had not been realized, it could not be held as that these airlines were defaulting assesses.

Travel agents carry out the functions of an agent and provide concessional tickets in lieu of the services rendered by them to the airlines, additional solicitor general Parag Tripathi said, adding that only the agents working for the respective airlines were given tickets at concessional rates as they brought bulk business for them.

The petition stated, “The Delhi High Court had erred in holding that the travel agent is liable to the airlines in its capacity as a debtor and not as an agent for the price of the ticket as soon as the property in ticket passes to the travel agents.”

According the department, the difference between the full value of the ticket and the concessional ticket would be the commission on which TDS should be deducted by the airline and the whole transaction had to be seen in terms of the intention of the assessees which is to offer or reward its performing agents.
It said that British Airways had failed to adhere to CBDT circular that clarified that if the consignee or an agent retained the commission.

Taxing Time
·                            The Delhi High Court verdict had come on a batch of petitions flied by the department against 5 various airlines
·                            The high court had also held that since the airlines had no obligation to deduct TDS on such notional commission it could not he hold that these airlines were defaulting assesses.
·                            According to the departments the difference between the values of the ticket will be the commission on which TDS should be deducted by the airline and the whole transaction had to be seen in terms of the intention of the assessees, which is to reward its agent.
While the  global concern of British Airways is assessed to tax in its parent country Great Britain,  the carrier is, liable to deduct TDS on the, payment or credits governed by Chapter XVII of the Act

Dec 26, 2009

FREE EDUCATION FOR ALL IN INDIA

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FREE EDUCATION FOR ALL IN INDIA
The Union Cabinet today approved the introduction of a Bill in Parliament for carrying out certain amendments to the Right of Children to Free and Compulsory Education Act, 2009. The Right of Children to Free and Compulsory Education Act, 2009 has been enacted by the Parliament to provide for free and compulsory education to all children of the age of six to fourteen years.  After receiving the assent of the President, the aforesaid Act was published in the Gazette of India on 27th August, 2009.
The Department of School Education and Literacy received representations from various organizations (a) working for the welfare of the children with disabilities and (b) who set up minority institutions, seeking certain amendments to the legislation.  Consequent upon examination of the issues/points raised in these representations it is proposed to make the following amendments in the Right of Children to Free and Compulsory Education Act, 2009:
(i)  Inclusion of children with disabilities within the meaning of ‘children belonging to disadvantaged group’
(ii) Providing that children with disabilities as defined in the National Trust  for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 shall have special rights to pursue free and compulsory elementary education; and
(iii) School Management Committee constituted under the Act by aided minority institutions shall perform advisory function.
A Bill will be introduced in the Parliament.

Dec 25, 2009

REPORT OF TASK FORCE ON GST

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REPORT OF TASK FORCE ON GST
 Further to the First Discussion Paper released by the Empowered Committee of State Finance Ministers on 10 November 2009, the Finance Commission has released its report giving its recommendations on GST design implementation.
Basic framework
Dual GST Model (Central GST and State GST) to be implemented concurrently by the Centre and the States.
The CGST and SGST should be levied on a common and an identical base.
No classification between goods and services in order to avoid classification disputes.
GST to be structured on a destination principle whereby the tax base shall shift from production to consumption.

GST Rates
Rate of CGST and SGST on all goods and services at 5% and 7% respectively.
Additionally, SIN goods to attract other taxes (other than those subsumed with GST) as a single levy.

Credit and refund
Cross utilization of credits between CGST and SGST not permissible
Full and immediate input credit to be allowed (CGST and SGST) on all purchases of capital goods in the year which the capital goods are purchased. Any transfer of capital goods at later stage to attract CGST and SGST liability.
Threshold limits

Threshold limit under CGST and SGST for goods and services to be uniform across states at Rs 1 million.
Small dealers (turnover of Rs 1 million to Rs 4 million) allowed opting for compounded levy of one percent each for CGST and SGST without ability to claim input credit.
Dealers of high value goods (gold, silver ornaments etc) permitted to opt for compounded levy without the ceiling of Rs 4 million.

Payment of CGST and SGST
Registered dealer to make a single payment of aggregate of all sums due to Centre and other States, electronically by furnishing Form GST-I.

Taxes to be subsumed
Central levies to be subsumed
Central Excise Duty, Additional Excise Duty, Additional Customs Duty (CVD), Service Tax, Surcharges and Cess.
States levies to be subsumed
VAT, Sales Tax, Entertainment Tax (not levied by local bodies), Entry taxes not in lieu of Octroi, Luxury tax, taxes on lottery, betting and gambling, State Cesses and Surcharges. Additionally, stamp duty, taxes on vehicles, taxes on goods and passengers, taxes and duties on electricity also should be subsumed,
Alcohol, emission fuels and tobacco to be subject to dual levy of GST and excise without any credit of the excise component. Industrial fuels should be subject to GST only.

Inter-state transaction of goods and services
Does not recommend the IGST model proposed in the First Discussion Paper.
All inter-state transactions of goods and services will be effectively zero-rated based on the ‘Modified Bank Model’ mechanism.
Inter-state seller to collect SGST from buyer in the destination state as if sale in origin state after adjusting input SGST for payment of output SGST.
Excess of output SGST over input SGST will be paid into a nodal bank.
Importing dealer shall use SGST paid in state of origin for payment of output SGST in destination state.
Consignment sales and branch transfers across states to be subject to treatment as an inter-state transaction and as transaction between two independent dealers.

Exemptions
Exemptions, if any, to be restricted to public services of the Government, transactions between employer and employee, unprocessed food articles covered under the public distribution system, education and health services.
Exemption up to turnover of Rs 15 million for small scale industries to be discontinued.
Area-based exemption (presently enjoyed in case of central excise duty) proposed to be discontinued under GST. Support would be provided in the form of direct investment linked cash subsidy for balanced regional development.
Exemption for developers of, or units in, SEZ to be discontinued.

Exports and imports
Exports to be zero rated.
Imports subject to both SGST and CGST.

Date of implementation
Date of GST implementation shall be postponed to October 2010. Administration and Registration
Central Board of Excise and Customs (CBEC) responsible for implementing CGST and State Tax administrations separately responsible for SGST.
Persons with annual aggregate turnover above Rs 1 Million required obtaining GST registration number based on PAN.
The Authority for Advance Ruling and the Appellate Authority shall be common for CGST & SGST.

RBI CIRCULAR ON MOBILE BANKING

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RBI CIRCULAR ON MOBILE BANKING
RBI/2009-10/ 273
DPSS.CO.No.1357/ 02.23.02/ 2009-10 December 24, 2009
A reference is invited to the guidelines appended to our circular no. RBI/2008-09/ 208, DPSS.CO.No.619 /02.23.02/ 2008-09dated October 08, 2008, on the captioned subject.

2. Based on the requests received from the banks facilitating mobile banking transactions, the guidelines are modified as under:

I. Transaction limit: In amendment of provisions of paragraph 8.1 of the above guidelines, banks are now permitted to offer this service to their customers subject to a daily cap of Rs 50,000/- per customer for both funds transfer and transactions involving purchase of goods/services. Presently, such transactions are subject to separate caps of Rs 5000/- and Rs 10000/ -respectively.

II. Technology and Security Standard: Transactions up to Rs 1000/- can be facilitated by banks without end-to-end encryption. The risk aspects involved in such transactions may be addressed by the banks through adequate security measures.

3. Remittance of funds for disbursement in cash:
In order to facilitate the use of mobile phones for remittance of cash, banks are permitted to provide fund transfer services which facilitate transfer of funds from the accounts of their customers for delivery in cash to the recipients. The disbursal of funds to recipients of such services can be facilitated at ATMs or through any agent(s) 2
Appointed by the bank as business correspondents. Such fund transfer service shall be provided by banks subject to the following conditions:-
I.                   The maximum value of such transfers shall be Rs 5000/- per transaction.

II.                Banks may place suitable cap on the velocity of such transactions, subject to a maximum value of Rs 25,000/- per month, per customer.


III.             The disbursal of funds at the agent/ATM shall be permitted only after identification of the recipient. In this connection, attention of banks is drawn to the provisions of the Notification dated November 12, 2009, issued by Government of India, under Prevention of Money Laundering Act, 2002, as amended from time to time.

IV. Banks may carry out proper due diligence of the persons before appointing them as authorized agents for such services.

V. Banks shall be responsible as principals for all the acts of omission or commission of their agents.

4. The directive is issued under Section 18 of Payment and Settlement Systems Act, 2007, (Act 51 of 2007).

Dec 20, 2009

SECOND HOUSE PROPERTY AND INCOME TAX INPLICATION

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SECOND HOUSE PROPERTY AND INCOME TAX INPLICATION

People constantly snub the tax involvement points before buying any second house property. I write this article for those people who are recently planning to buy the second house. I am sure this article will help you to understand the tax implication of house property income of the second house or more house/flats.
One house or part of a house used by you for your own residence is exempted from tax. If you have two or more houses are used by your own residence, you have the option to choose one of the self-occupied house, for which you would like to get an exemption from tax and its annual value will be Nil. The second house or other houses deemed to be rented out as per income tax act whether not actually rented out.
What is Annual Value of house property and how it is determined?
The annual value means the amount for which the property might reasonably be expected to be let out from year to year. However, if the actual rent received or receivable in respect of any let out property.
The annual value is always taken to be NIL in case of one self-occupied property. So it is very important and beneficial to plan his taxes legally.
Now get to the main issue, if you have second house property or planning to buy it.
How to calculate annual value/taxable value of property another then self-occupied property?
As I earlier discussed the assessee has the option to choose only one house as self-occupied property. Rest of property is assessable by the income tax as follows.
Condition 1: if the house is actually rented out –
  • The actually rent received is treated as house property income
Condition 2: if the house is not actually rented out –
  • The notional rent as per income tax act treated as house property income.
Deductions
From the annual value the following deductions are available u/s 24 of the income-tax ACT w.e.f. asst. Year 2002-03.
  • Taxes paid to local authority,
  • Taxes paid to municipal corporation – municipal taxes
  • 30% of the annual value of the house property as repair and maintenance charges ( The deduction is fixed @ 30% whether assessee incurs more or less amount on repair and maintenance of the house) as per sec. 24(a)
  • Actually Interest paid on housing loan whether deemed to be let-out and actually let-out
(For self-occupied property, maximum interest on housing load is restricted to Rs. 1,50,000 p.a., subject to certain conditions.)
Where the assessee owns only one house property and it cannot actually be occupied by him because it is situated at a place other than a place where he is employed or carries on business or profession, in such a case also the annual value of the property is taken as nil provided the property is not actually let out.
The rent is computed based on the current market rates and are taxable. So be obvious on the intention of buying a second house before actually buying it.