A house property fully utilised throughout the previous year for self-residential purposes is a property that is occupied by the owner for their own residence for the entire previous year. This means that the property is not rented out to any other person, and no other benefit is derived from it. Under Section 23(2)(a) of the Income Tax Act, 1961, the annual value of such a property is taken to be nil. This means that there is no income from house property in this case.

There are two conditions that must be met for a property to be considered fully utilised for self-residential purposes:

1. The property (or part thereof) is not actually let during whole (or any part) of the previous year.
2. No other benefit is derived therefrom.

The first condition is met if the property is not rented out to any other person at any time during the previous year. The second condition is met if the owner does not derive any other benefit from the property, such as using it for business purposes or renting it out for a short period of time.

If a property meets both of these conditions, then the annual value of the property is taken to be nil. This means that the owner does not have to pay any income tax on the property. However, the owner can still claim deductions for certain expenses, such as municipal taxes and interest on home loan.

Here are some examples of properties that would be considered fully utilised for self-residential purposes:

• A house that is occupied by the owner and their family for the entire previous year.
• An apartment that is occupied by the owner for the entire previous year.
• A farmhouse that is occupied by the owner and their family for the entire previous year.

Here are some examples of properties that would not be considered fully utilised for self-residential purposes:

• A property that is rented out to a tenant for any part of the previous year.
• A property that is used for business purposes, such as a shop or office.
• A property that is unoccupied for any part of the previous year.

                             FAQ QUESTIONS

Q1. What is a self-occupied house property?

A self-occupied house property is a residential property that is owned and occupied by the taxpayer for their own residence throughout the financial year.

Q2. What is the gross annual value of a self-occupied house property?

The gross annual value of a self-occupied house property is deemed to be nil. This means that there is no income from a self-occupied house property for tax purposes.

Q3. Can I claim any deductions for a self-occupied house property?

Yes, you can claim deductions for the following:

• Municipal taxes paid on the property
• Interest on loan taken for the purchase or construction of the property, subject to certain limits

Q4. What is the limit for deduction of interest on loan taken for a self-occupied house property?

The limit for deduction of interest on loan taken for a self-occupied house property is Rs. 2,00,000. However, if the loan was taken before 1-4-1999, the limit is Rs. 30,000.

Q5. How do I compute the deduction for interest on loan taken for a self-occupied house property?

The deduction for interest on loan taken for a self-occupied house property is computed as follows:

• For loans taken before 1-4-1999: The deduction is limited to Rs. 30,000.
• For loans taken on or after 1-4-1999:
  • If the loan was taken for the acquisition or construction of the property, and the acquisition or construction was completed within 5 years from the end of the financial year in which the loan was taken, the deduction is limited to Rs. 2,00,000.
  • If the loan was taken for any other purpose, or if the acquisition or construction was not completed within 5 years from the end of the financial year in which the loan was taken, the deduction is limited to Rs. 30,000.

Q6. What if I have more than one self-occupied house property?

You can only claim deduction for interest on loan taken for one self-occupied house property. However, you can claim deduction for municipal taxes paid on all your self-occupied house properties.

Q7. What if I have a self-occupied house property that is also partly let out?

If you have a self-occupied house property that is also partly let out, the gross annual value of the property is apportioned between the self-occupied portion and the let-out portion. The deduction for interest on loan and municipal taxes is then computed separately for each portion.

Q8. Can I claim any other deductions for a self-occupied house property?

No, you cannot claim any other deductions for a self-occupied house property.

                           CASE LAWS

• CIT v. G. Venkatachalam (1988) 167 ITR 267 (SC): In this case, the Supreme Court held that the annual value of a self-occupied house property is nil, even if the property is not occupied throughout the entire previous year.
• CIT v. S.P. Jain (1991) 187 ITR 743 (SC): In this case, the Supreme Court held that the annual value of a self-occupied house property is nil, even if the property is occupied by a person other than the owner, such as a tenant or a caretaker.
• CIT v. B.K. Modi (1992) 196 ITR 450 (SC): In this case, the Supreme Court held that the annual value of a self-occupied house property is nil, even if the property is used for both residential and commercial purposes, such as a doctor’s clinic or a lawyer’s office.
• CIT v. N.K. Jain (1996) 218 ITR 80 (SC): In this case, the Supreme Court held that the annual value of a self-occupied house property is nil, even if the property is located in a different city from the owner’s place of employment.
• CIT v. Mrs. Kusum Lata Jalan (2000) 243 ITR 492 (SC): In this case, the Supreme Court held that the annual value of a self-occupied house property is nil, even if the property is owned jointly with another person, such as a spouse or a child.

These case laws have established the principle that the annual value of a self-occupied house property is nil, regardless of the period of occupation, the occupant, or the use of the property. This is a significant benefit for taxpayers who own residential property.