Friends,
As you may know where a person has occupied more than one house for residential purposes, only one house, as chosen by him will be treated as ‘self occupied’ and all other houses will be deemed to be let out and the income from such houses would be computed as indicated earlier. In regard to one house treated as used for own residential purposes throughout the year, Section 23 (2) (a) prescribes that annual value of such house shall be taken to be nil, if the conditions mentioned below are satisfied:
* the property (or part thereof) is not actually let during whole (or any part) of the previous year; and
* no other benefit is derived therefrom
Interest on borrowed capital for self occupied property
The maximum amount of interest permissible in cases of self-occupied property is Rs.1,50,000 (in respect of funds borrowed on or after 01.04.1999). Interest upto Rs.1,50,000 is deductible if the following conditions are satisfied:
* Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property;
* the acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed; and the person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principal amount outstanding under an earlier loan taken for such acquisition or construction.
In the above context the following further aspects have to be kept in view:
1. If capital is borrowed for any other purpose (e.g. if capital is borrowed for reconstruction, repairs or renewals of a house property), then the maximum deduction on account of interest is Rs.30,000 (and not Rs.1,50,000).
2. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential unit could have commenced before April 1,1999 but, as long as its construction/ acquisition is completed within 3 years, the higher deduction of Rs.1,50,000 would be available. Also, there is no stipulation regarding the construction/acquisition of the residential unit being entirely financed by the loan taken on or after April 1, 1999. It may be so in part.However, the higher deduction upto Rs.1,50,000 can be taken for the loan which has been taken and utilized for construction/acquisition after April 1, 1999. The loan taken prior to April 1, 1999 will carry deduction of interest upto Rs. 30,000 only (CBDT’s circular No. 779,dated September 14, 1999).
Rs. 1,50,000 maximum deduction will not be available in the following situations:
1. if capital is borrowed before April 1, 1999 for purchase,construction, reconstruction, repairs or renewals of a house property;
2. if capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
3. if capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed. In the above situations only deduction upto Rs. 30,000 can be claimed.
