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Navigating the intricacies of tax rules can be challenging, especially when it comes to property ownership. One common question that arises is whether a vacant property can be claimed as self-occupied when filing an Income Tax Return (ITR). If you or your spouse owns a house that has remained vacant for the entire previous year, understanding how to categorize it for tax purposes is essential.

Understanding Self-Occupied Property Status

Under Indian income tax laws, a person can claim up to two properties as self-occupied. This means that if you own more than two houses, you must declare any additional properties as "deemed to be let out." For these properties, you would need to offer notional rent for taxation, even if you haven't received any actual rent.

However, notional rent differs from nominal rent. It is the rent that the property could reasonably be expected to fetch in the open market if it were let out.

Can a Vacant House Be Claimed as Self-Occupied?

To qualify a property as self-occupied, it's not necessary for the taxpayer to physically reside there. The crucial factor is that the property should not be rented out. If you reserve the property for your self-occupation or if it’s occupied by someone else (e.g., a relative) without receiving any rent, you can treat it as self-occupied.

This rule is beneficial for individuals or families owning multiple properties. The law allows each taxpayer (not each family) to claim a maximum of two properties as self-occupied. Therefore, if your spouse owns a house that has remained vacant throughout the previous year, she can claim it as self-occupied when filing her ITR, provided it wasn't rented out.

Key Points to Remember

• Maximum of Two Properties: Each taxpayer can claim up to two houses as self-occupied. Any additional properties will be considered as deemed let out.
• Notional Rent: If a property is deemed let out, you must offer notional rent for taxation, which is the market rent the property would fetch if rented.
• Vacant Properties: A property can still be claimed as self-occupied even if it's vacant, as long as it hasn't been rented out during the year.

Conclusion

Understanding these tax rules can help in making informed decisions about property declarations in your ITR. If your spouse owns a property that was vacant throughout the year, it can be treated as self-occupied, which can significantly impact the tax calculations.

Disclaimer

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