Property owners to get two way relief under new direct tax provisions

The Direct Tax Code Bill 2010 (DTC), which was recently introduced in the parliament, would provide relief to the property owners on two main counts firstly, no deemed taxation for house property and secondly, deduction for interest for self occupied house property.

According to analysts while, even as the concept of deemed taxation of more than one house property has been done away with an expectation of a simple mechanism of taxation of rental income has also been met with to a large extent.

The bill provides for a simplified method for the computation of income from house property on the basis of gross rent - the amount of rent received or receivable contractually for the financial year.

Deductions on account of municipal taxes, standard deduction on the Gross rent and deduction of interest on loan paid, during the financial year are allowed.

No tax is proposed to be levied on multiple house properties, lying vacant or that are used for self-occupation. Currently apart from a self occupied property, tax is required to be paid in respect of other properties on a deemed rental basis.

The Bill also re-introduces provisions for deduction on account of interest on housing loan for a self occupied property (subject to an upper limit of Rs150,000) as also per-construction acquisition period interest in five equal installments.

Under Bill proposals, interestingly, it is being sought to change the scheme of deduction for interest on loan for self occupied house property. In case of self occupied property, the deduction for interest on loan taken would be available from gross total income, as against the computation scheme under the present Act.