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I own two houses. House A is self-occupied (notional rent: ₹15,000 per month ) and House B has been rented out (rent: ₹51,000 per monthm). For filling IT returns, can I show B as self-occupied and A as rented with notional rent. Please advise.
PS Bedi
As per Section 23 of the Income Tax Act, the annual value (income from house property) of any let-out (rented out) property shall be the amount of rent received or receivable in respect of such property, and the annual value of a self-occupied house property shall be nil.
In view of the above, a let-out property cannot be treated as self-occupied. The annual value from the let-out property is required to be offered for tax under the I-T Act.
Therefore, in your case, House A will be regarded as self-occupied property. House B has to be reported as rented-out property and the actual rental income received/receivable from House B is taxable subject to specified deductions as per Section 24 of the I-T Act.
As per the newly inserted Section 112A, long-term capital gains (LTCG) exceeding ₹1 lakh arising from sale of equity shares held for more than one year shall be taxable at 10 per cent. I find that to arrive at the LTCG of more than ₹1 lakh, one has to first adjust the LTCL against LTCG as Schedule 112A provides. Why it is not allowed to utilise first the benefit of exemption of LTCG up to ₹1 lakh before setting the LTCL of the same year and allow the latter to be set off against LTCG over and above the limit of ₹1 lakh?
Secondly, I do not find in the present ITR-2 the column for deduction of LTCG threshold limit as per Section 112A, ie, ₹1 lakh under Para B(4) of Schedule CG as it appeared in the previous year ITR-2. Does it mean the benefit is not available now?
Note: To elaborate the above for clarity, if my LTCG is ₹1.5 lakh and the LTCL is ₹1 lakh, in Schedule 112A, the LTCL first gets adjusted against the LTCG of ₹1.5 lakh, leaving a balance of LTCG of ₹50,000, which is below the threshold limit of ₹1 lakh. In my view, we should be allowed to first deduct the threshold limit of ₹1 lakh from the LTCG of ₹1.5 lakh. The balance ₹50,000 should be allowed to be adjusted against the LTCL of ₹1 lakh, leaving a balance of LTCL of ₹50,000 to be carried forward for future years.
Cyril Dsouza
Section 112A of the I-T Act prescribes the manner for computing the tax dues on long-term capital gains (LTCG).
Accordingly, the taxpayer needs to first arrive at his total taxable income (after adjusting current year’s long-term capital loss (LTCL) and setting off brought-forward LTCL). From the LTCG on specified assets in excess of ₹1 lakh included in the total income, the taxpayer is required to pay tax at the special rate of 10 per cent. This deduction of ₹1 lakh is available for AY2020-21 as well.
Further, there has been only modification in reporting of LTCG under Section 112A in ITR-2 of AY2020-21 compared with ITR-2 of AY2019-2020. In Schedule 112A, a detailed information on purchase/sale of shares needs to be provided. The LTCG income will then reflect in sr.no: 4(a) of sub-head B of ‘Long Term Capital Gain’ under the schedule ‘Capital gains’. Further, under ‘Schedule SI Income, chargeable to tax at special rates’, taxes are computed at 10 per cent on LTCG in excess of ₹1 lakh (Sr.no.4).
The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in
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