{"id":9586,"date":"2022-08-27T13:52:59","date_gmt":"2022-08-27T13:52:59","guid":{"rendered":"https:\/\/www.kanakkupillai.com\/new-learn?p=9586"},"modified":"2025-06-12T16:52:29","modified_gmt":"2025-06-12T11:22:29","slug":"how-is-tax-levied-on-rent-from-vacant-land","status":"publish","type":"post","link":"https:\/\/www.kanakkupillai.com\/learn\/how-is-tax-levied-on-rent-from-vacant-land\/","title":{"rendered":"How is Tax Levied on Rent from Vacant Land?"},"content":{"rendered":"

Every movable asset has the potential to produce certain annual revenue for the landlord if it is not self-occupied; the property ownership holder has tax repercussions under Indian law. It\u2019s interesting to note that the tax obligation would exist even if the owner had no rental revenue and the property was vacant during the year.<\/p>\n

In this article, we shall go into more detail about the tax effects of an empty property. To determine what constitutes an empty home or vacant land, we must first ascertain what constitutes legally self-occupied property.<\/p>\n

Meaning of Self-occupied property<\/h2>\n

A property is deemed self-occupied when the owner or their family lives there for at least a year. For this, the owner\u2019s family may consist of his or her parents, spouse, and children. Such properties have no gross annual value or GAV, the yearly value under income tax<\/strong><\/a> legislation. For tax purposes, a property is also deemed self-occupied if the owner rents a home in another city for professional or personal reasons. In contrast, his own home is either unoccupied or occupied by family members.<\/p>\n

Vacant land: Modifications following the budget<\/h2>\n

According to the Interim Budget proposal, two properties owned by one person could be considered self-occupied if they haven\u2019t been rented out. An owner may only declare one property self-occupied on their tax returns before this proposal. The tax was charged on the fictitious rental revenue from the second property, regardless of whether it was vacant or occupied by some family members. Any two of a property owner\u2019s many properties may now be declared self-occupied.<\/p>\n

As a result, if you own three houses, two of which are vacant and one of which is self-occupied, any of the three properties may be claimed as self-occupied to calculate your income tax for the year.<\/p>\n

The third property will be taxed as though it were \u201cdeemed to be let out.\u201d If a landlord has three properties and none are rented out, they can declare any two of them as self-occupied on their tax return. It\u2019s noteworthy that the property owner, in this case, can declare two of his several residences as self-occupied, which can be beneficial.<\/p>\n

Compared to a comparable property in a common or normal neighbourhood, a property located in a premium neighbourhood offers a larger potential for rent generation. It makes perfect sense for them to claim premium properties in their portfolio as self-occupied while filing income taxes<\/strong><\/a>, according to experts who specialise in property law and other allied laws, since the law doesn\u2019t specify which of their many properties the holder can declare as self-occupied.<\/p>\n

Tax on real estate presumed to be rented out.<\/h2>\n

An asset that has the potential to produce a notional income but is neither self-occupied nor rented out would be deemed to be let out.<\/p>\n

By the tax code 1961, this fictitious income is subject to tax levied on \u201cincome from house property\u201d. It is similar to how a property would be calculated if rented out. The sole distinction is that the actual rental income determines the tax liability for a rented property. However, for properties deemed to be rented out, the tax liability is determined by the property\u2019s potential to generate rent in a given market.<\/p>\n

Income tax on rental house property<\/h2>\n

Let\u2019s take this as an example. The tax obligation on a landlord\u2019s deemed-to-be-let-out 2 BHK property in a particular area would be calculated as follows:<\/p>\n

If 2 BHK units generally fetch an annual rental income of Rs 10 lakh in a certain locality, the calculation would be as follows.<\/p>\n

The GAV of the mentioned property would be this sum. The taxpayer would need to determine the property\u2019s net annual value, or NAV, calculated by subtracting the municipal taxes paid in a year from the gross assessed annual value, or GAV.<\/p>\n

The deductions that are allowed on Vacant House Property<\/h2>\n

The tax<\/a> code permits the NAV to be deducted based on two different criteria:<\/p>\n