How self-occupied property is treated
You have stated that interest on borrowed capital will be admissible against the income from self-occupied property even without the limit which is placed under the present Act. There are number of other articles deploring the denial of deduction of interest against self-occupied property. What is the correct position of the proposal in the Direct Taxes Code?
Clause 4 to 6 under Sec. 25 of the Code is relevant and is to be read together. Clause 4 authorises adoption of nil value of a house or part of a house which is not let out. But clause (5) clearly says that clause 4 will not be applicable where it is actually let out for any part of the year or “any other benefit is derived from it by the owner”. Self-occupation is a benefit derived by the owner so that the benefit of nil income in clause 4 cannot apply for self-occupied property. The choice of one house in clause 6 can, therefore, only refer to a house property, which is neither let out nor self-occupied.
There is no section in the Code parallel to Sec. 23(2) of the present Act giving exemption for a house “in the occupation of the owner”. Sec. 24 of the Code defines income from property as gross rent reduced by the deductions. Sec. 26 of the Code clearly allows interest as a deduction from the gross rent. What is lost for the taxpayer in the Code is the exemption for self-occupied property. Deduction for interest without limit is allowable for all properties, the income of which is taxable. What is retained is the option for exemption for one property, which is neither let out nor self-occupied under the option under Sec. 25(6) of the Code.
S. RAJARATNAM
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