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Exemption for residential house from wealth tax: whether one or two

This has reference to your reply to the query raised in The Hindu on February 27, 2006, regarding the chargeability of a residential house property in excess of one house. We wish to give below our understanding of the provisions of the Wealth-tax Act. We have gone through the provisions of the Wealth Tax Act and observe as under:

Section 2(ea) lists out the various assets chargeable to tax and at the same time excludes a house which is let it out for a minimum period of 300 days in a previous year from the definition of assets. There is also exemption under Sec. 5(vi) for one residential house.

As such, an assessee who owns two buildings of which one is a residential house and lets out for a minimum period of 300 days can exclude the same from the net wealth and claim exemption under Sec. 5(vi) in respect of the other building.

Sec. 2(ea) excludes any residential property let out for a minimum period of 300 days along with any other commercial establishment or complexes. This exception is based on the view that let-out property has a productive use. At the same time, there is an exemption under Sec. 5(vi), which exempts one house.

This inference of the reader P. V. Natarajan, Chartered Accountant, Hyderabad, is that, in effect, a person can have exemption for two buildings one of which is a residential house exempted under Sec. 5 (vi) of the Wealth-tax Act and other under the definition of Sec. 2(ea) of the Act as against the commonly held view that only one house property is exempt as indicated in this column.

He is right, that in circumstances and in law pointed out by him, there is no reason for discrediting such an understanding, since one is an exclusion from the definition of assets and the other exemption is statutorily allowed.

S. RAJARATNAM

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