Monday, August 22, 2016

When is Annual Value “NIL”?


When is Annual Value “NIL”?

The annual value can be considered to be nil if the owner is residing in his property (Self-occupied property or SOP) and does not derive financial benefit from the same. It will be nil if the owner of the property has to move out of the city his property is in to another city for work and resides in a rented property not owned by him.

Example: Mr. Babu, who bought a house in Bangalore has to move into a rented place in Pune for his job. The annual value on Mr. Babu’s Bangalore property will be nil, and he will get a tax deduction for interest paid on borrowed capital.

How do I Save Tax on Income from House Property?

Careful planning can enable you to save a sizeable amount from taxation. Some of the things you can do to save tax are as follows:
Joint Home Loan – If you jointly own a property with someone and also apply for a joint home loan with your partner, you will both be eligible for tax deductions on interest up to Rs. 1,50,000 each.
Planning a second home? If you already have one self-occupied property registered to your name and wish to avoid paying taxes on a second home, register the second property on your spouse/relatives name to avoid excess taxation.
Joint ownership – Taxation on income from house property can be divided between co-owners, and hence lessen the load.
Ownership of more than one property – If you own multiple properties, only one of these can be registered as your residence and fall under self-occupied property (SOP). It is important to evaluate the tax liability on all your properties and choose the one with the highest tax liability to call home, and let out the remaining. You can also change the SOP every year.
Empty houses – that you own will still be taxed based on the fair rental value, so it’s advisable to let any and all empty properties out, enabling income and no loss because of taxation.

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