Qus: A friend wishes to buy a commercial property (office/retail) for Rs. 60 L.Out of which 20 L loan would be taken at an EMI of Rs. 22,500 for 15 years. A rent of Rs. 50,000 is expected per month. The maintenance charges of Rs. 1500 per month would be paid to the builder.
For clarity, lets assume the OFFICE unit is purchased and let out - rent being recd from April 1st.And the principal is 70,000 and Interest is 2,00,000 in the current year. Rs. 1,00,000 under sec 80C is taken under self occupied property, therefore is not available.
Part(A)Pls confirm Is my understanding correct :
Total rental Income = 6,00,000
Less 30 % = 1,80,000
Less interest on loan= 2,00,000
Net taxable income/TAX =2,20,000/67980
He already has a self occupied property and another residential unit which is let out at 7000 pm = 84,000 (-30%=56,000) and a loan interest of 60,000 and hence no income based on the above rules.
This is his planning for the third property.
ANS:(A)yes ,Your understanding is correct ,
if a person has more than one properties and taken loan on that properties then he can deduct interest of all the properties .
if properties are let out or deemed to be let out without any limit however for one self occupied house the Limit is 150000 in a financial year
Income from all the house in aggregate after plus/minus will be taken as the income from house property the example is given below
In your case there is slight mistake in calculation of income of let out house ,it should be 84000-30%(standard deduction for repair and maint.)=84000-25200=58800, but in this case also as the interest paid is more than net rent nothing is taxable moreover negative income from this house i.e 58800-60000(interest)=(-)1200 can be reduced from net income of the office rent ,as per section 70 loss on one house property can be reduced from other house property,so plus minus income from all the house properties will net taxable income from the house property.
Example:suppose if you have two buildings A and B , A is rented out at 100000 per year and B at 200000 and interest on both the properties is 100000 and 50000 respectively
His income will be
A property=(100000-30%)-100000=(-)30000
B property=(200000-30%)-50000=90000
income from house property=90000+(-)30000=60000
Qus.Part(B)Can he take such interest deduction on any no. of properties????
Ans(B)As explained above person can avail interest on any number of properties,.No limit and aggregate of all the property will be taxable as explained above in the example....even loss can be carried forward and can be adjusted in next years
Qus.Part(C)If he takes this OFFICE with his father 40:60 (father invests 24 L, son invests 16 L and son takes 20 L loan )who has no income ,but would get 40% rent i.e. 20,000 * 12 = 2,40,000 so no IT being a Sr. citizen.
The son gets 360,000 rent - 30 %=252,000. Less interest of 2,00000 = 52,000 Taxable. So the on pays tax abt 16,000. Is there any problem with this scheme?Is there any different treatment for a retail shop , office or residential unit?
Ans(C) your tax planning is legitimate and no draw back in it just make sure two things
while investing in this property the share in registration should be clearly mentioned.
Arrange for separate tds certificate,if required on rent received
There is no difference in treatment in interest except for
one self occupied house (Interest Limit is 150000 for loan for construction/purchase of house and 30000 in case of renovation/alteration/modification/repair of house after completion of certain condition)
Shop/property used in own business (in this case interest paid on house property is treated as expense of business and property valuation is not dealt under income from house property head and taken as nil in business & profession.)
there is no other difference in treatment of Income of House property whether shop,office or residential unit.
