The budget memorandum highlights an amendment to Section 23(2) of the Income Tax Act, which previously allowed owners to claim a property’s annual value as nil only if they occupied it for personal residence or could not occupy it due to employment, business, or profession elsewhere. This provision often led to confusion, with taxpayers questioned by the IT department about whether their reasons for not occupying the property were valid.
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Prakash Hegde, a Bengaluru-based chartered accountant, noted that taxpayers were often asked to prove they were staying in rented accommodation in another city due to work commitments, even if their properties remained vacant.
“With a view to simplifying the provisions, it is proposed to amend the sub-section (2) so as to provide that the annual value of the property consisting of a house or any part thereof shall be taken as nil, if the owner occupies it for his own residence or cannot actually occupy it due to any reason,” the memorandum read.
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Gautam Nayak, partner at CNK & Associates, welcomed the change, noting that it will streamline the rules and reduce compliance challenges.
SOP vs DLOP
The 2019-20 Budget allowed taxpayers to declare two properties as self-occupied (SOP), qualifying both for nil annual value. Prior to this, only one property could be claimed as SOP, with additional properties treated as deemed let-out property (DLOP), even if not rented or occupied by family members.
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“The new rules will make it easier for the tax-payer to claim two properties as SOPs, even if he or she occupies them or is not able to occupy them for any reason, and also wherever they may be,” Hegde said. “This proposal benefits taxpayers by only requiring proof that the property is not let out, and that the owner could not occupy it due to employment, business, or profession in a different location.”
