Post on 16th Nov 2016 by Pradeep Jain, Director, Paperpink
Under Income Tax Act, an individual can keep one residential premises as a self occupied property but if he purchases another residential premises then even though that premises is not rented and he is not receiving any rent from that, an amount equal to notional rent will be calculated and added in his income under the head income from other sources. For example if Mr.A possesses two houses in his own name and none of them is rented. Any one house at his choice can be treated self occupies and for other house a value equal to notional rent will be calculated and added in his total income. Here Mr.A can plan his affairs in such a way that another house can be bought in the name of Mrs. A from her own income and in such case she can also posses one more self occupied property. So even through husband and wife both are living in same house, for income tax purpose they can posses two different houses as self occupied for income tax purpose and nothing will be taxed as notional rent . But one step ahead from this situation, if they want to possess third house then in that case notional rent will be calculated and added in the income of owner.
Now if in above case if Mr.A and Mrs.A plan their financial affairs in such a manner that they buy third house in the ownership of Mr.A (HUF), then in such case third property will also become self occupied property and notional rent will not be added in the income of Mr.A, Mrs.A or Mr.A (HUF) if it is actually not given on rent. In this case the third house is also considered self occupied even though it is vacant and family is not living in that house because HUF can also hold one self occupied property under the income tax act.
In above case HUF can also take a home loan for property and claim benefit of deduction of interest paid on home loan up to Rs. 2 Lakhs form income of HUF under section 24(b) of the income tax act.