Before Finance bill, 2019 a person could keep only one house as self occupied property and need to pay deemed rent on second house and one used to get 2 lakh deduction of interest paid on such home loan.
After Finance Bill, 2019 a major change was brought wherein u/s 23(4) a person could hold upto 2 house as self occupied property. Therefore, now a person could show 2 house as self occupied and if he owns more than 2 house he needs to pay deemed rent on same.
However, there were some corresponding changes which were expected which includes:
1. Increase in limit for deduction of interest in case of self occupied property:
Before this amendment as mentioned above a person could claim 2 lakh as deduction of interest paid for acquiring self occupied property and after this amendment it was assumed that this limit would be increased to 4 lakh as now one could hold 2 house property. However, contradictory to the amendment was made to section 24(b) wherein it was said that one could claim an aggregate of 2 lakh deduction of interest on housing loan in case of self occupied property.
“Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed, the amount of deduction [or, as the case may be, the aggregate of the amounts of deduction]under this clause shall not exceed two lakh rupees.”
2. Relaxation in definition of Self occupied property:
As per section 23(2), definition of self occupied property is as under:
“Where the property consists of a house or part of a house which—
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him.”
Now, the relaxation was provided by government to people who own two houses either as their investment or for their family. Now because of above definition if we say a person owns 2 house where in 1 house he lives and he has purchased another house for his parents, then in that case the above conditions won’t be fulfilled and hence one won’t be able to take benefit of the above relaxation.
Let’s assume another situation where a people has one house for his family and he has purchased another farm house as his vacation house. Now he will show one of his house as his residence but a person can’t technically reside in two house and since he lives in his own house he even doesn’t fulfill the second condition and therefore he can’t declare his farm house as self occupied property.
Therefore the CBDT should provide necessary clarification in the above matter so that people can take benefit of the new amendment as it was meant to be.
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