I have a building which has three small independent flats. All the flats have been given to different tenants. Single construction housing loan was taken for the construction of this building. I pay only one property tax for the whole house. If I use ITR-2, I will have to break down my home loan EMI and property tax across the three flats, which is not possible as it is calculated in full. But, if I use ITR-1, I can easily include pre-moratorium interest, home loan interest, property tax etc. without dividing it into three parts. I can also club the rent of all the three flats. Can the building (with three flats) be treated as a house property so that I can use ITR-1 instead of ITR-2? (name withheld)
For the purpose of capital gains exemption, various judicial authorities have held that a house consisting of different units can be treated as a single house, provided it is used by the family as a single residential unit. In your case since the three let-out flats are not used as a single residential unit but are used as independent units, it is not intended as a residential house for the purpose of offering rental income. may be considered. Further, the ITR form also requires you to provide details of various tenants, given the fact that if the property is let out, it would be unfair of you to offer the total rental income received for a single house. that it is used. Several residential units and are rented out to different tenants.
Even if you have taken a home loan and are paying the same municipal tax, it is not impossible for you to allocate interest and municipal taxes on some rational basis. You can either use the carpet/built-up area of each unit as the basis for allocation of interest and municipal taxes. Alternatively you can get the valuation of each of the three units and allocate these two items in proportion to the respective valuations of these units. The basis of allocation adopted should be logical and consistent from year to year.
Balwant Jain is one tax Investment are experts and can be reached on Twitter at jainbalwant@gmail.com and @jainbalwant.
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