As mentioned earlier, 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:
a. the property (or part thereof) is not actually let
during whole (or any part) of the previous year; and
b. 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:
i.
if capital is borrowed before
April 1, 1999 for purchase, construction, reconstruction, repairs or renewals
of a house property;
ii.
if capital is borrowed on or
after April 1, 1999 for reconstruction, repairs or renewals of a house
property; and
iii.
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.
