Your Taxes

I own an apartment in Hyderabad, which is self-occupied. I also have an apartment in Chennai, jointly with my wife. Both of us are tax assessees and we have shown the rental income from the flat at Chennai in our respective individual returns. The flat is lying vacant since October 2016; a huge maintenance fee is being paid to the society on this flat. There is no housing loan on the Chennai flat. What are the implications on this flat for AY2017-18. As no one is willing to take it on rent, how do I assess the annual let-out value for inclusion of notional rental income in my return?

Else, can my wife claim the the flat as self-occupied from November 2016 onwards and show annual let-out value as zero for the five-month period (November 2016-March 2017)? If yes, how can I show it in the return?

V Narayanan

As per the provision of the Income Tax Act, 1961, in case of let-out property, the annual value of the property shall be the annual rent received or receivable by the owner or the fair rental value, whichever is higher. In case of property which is let out and vacant for whole or part of the year and due to such vacancy, the actual rent received or receivable is less than the fair rental value of the property, then the annual value of the property shall be such actual rent received or receivable.

Due to non-availability of fair rental and actual rental amounts, I presume that for the Chennai property, the actual rent received shall be more than the fair rental value of the property. So, the annual value of your Chennai property shall be the actual rent received till October 2016. While calculating the annual value for the FY 2016-17, the period for which the property is lying vacant shall be ignored.

The Act does not provide for any deduction on account of maintenance expenses. You can reduce the amount of municipal taxes, if any, paid by you for the Chennai property from the annual value. Further, a standard deduction of 30 per cent is also available against the net annual value (that is, annual value minus municipal taxes). The Hyderabad property shall continue to be considered as self-occupied, the annual value of which shall be considered to be nil. In the hands of your wife, income from the Chennai property shall be taxable in the similar manner as specified above in your case.

In case of filing the ITR-1 form, you need to report directly the income from house property (that is, income after claiming the deduction of municipal taxes and standard deduction). However, in case of other income tax return form (namely, ITR-2A, ITR2, ITR4S, ITR4), where a separate annexure is available to fill all the details, the annual value (that is, actual rent received or receivable till October 2016), municipal taxes and standard deduction shall be reported separately at the specified columns.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in