How to save tax on second apartment where I will not get RENT ?

POSTED BY Sambaran Mitra ON December 4, 2013 2:22 pm COMMENTS (13)

I want to buy a second apartment to house my parents there. Hence, I will not be getting any rent from that apartment.

However, I heard that I am supposed to pay tax on notional-rent (whether I actually get any rent or not). I want to know

1. How is the notional rent determined?

2. Is there any way to avoid the tax outgo for the notional rent by proving in some manner that I am not getting any rent?

13 replies on this article “How to save tax on second apartment where I will not get RENT ?”

  1. ashalanshu says:

    Dear Sambaran, the valuation of jewelry is very easy. Contact any Gold shop in your city and ask fora valuation report. Based upon this valuation report, you may do the transfer of asset to your spouse in exchange of these jewels or these jewels ‘ll remain as mortgage property with you till your spouse can pay back the consideration amount of the property transferred to her.



  2. Sambaran Mitra says:

    However the act raises more questions. What is adequate consideration? If I am taking jewels from my wife how much shall I value it at? Does that valuation need some kind of certification and formal agreement to document the transaction? The process looks a bit shady but it is indeed blessed by the tax-laws.

    I am posting all these to solicit answers as well as share what I learnt painstakingly. I have benefitted a lot from this forum. I have consulted professional tax experts but none could provide the answers I shared above. That was pretty disappointing.

  3. Sambaran Mitra says:

    Section 64 (iv) tells how I can avoid ‘clubbing provisions’ by getting an adequate-consideration. Cut pasting the relevant paragraphs from the act below:

    64. Income of individual to include income of spouse, minor child, etc. 1 2[ 3[ (1)] In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-
    (iv) subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart;

    You can get the full act at:

  4. ashalanshu says:

    Dear Sambaran, I said, do it but be ready to answer if Income Tax people ask. 🙂

    Can you contact me over my persoanl gmail id?



  5. Sambaran Mitra says:

    Ashal, can you elaborate a bit more? The article suggests this to be a correct and legal way.

  6. ashalanshu says:

    Dear Sambaran, do it but be ready for tough questions from Income Tax people.



  7. Sambaran Mitra says:

    Apparently I can buy the house under my wife’s name. I can save myself from the clubbing provision by making my wife relinquish her jewels officially in my name and giving her the house in return. In that case the notional rent income from that house need not be added to my income. Data courtesy:

    Cut pasting a sentence from the article:
    “Similarly, if you transfer a house in your wife’s name in exchange for her jewellery, the rental income will not be taxed in your hands”

  8. ashalanshu says:

    Dear Sambaran. you can base your calculations on the basis of running rent in your area. Please mail me on my personal E-mail id to discuss your issue as some more personal info from you I need to discuss which you may not want to disclose here in public forum.



  9. Sambaran Mitra says:

    Also, I will like to know how to arrive at notional rent? Searching in the internet, I found out formula where the notional rent is a function of :
    1. Standard rent by rent control act
    2. Municipality determined rental.

    My doubt is that I am not able to figure out the municipality-determined-rental for my area. Can anybody give an example of municipality-determined-rental for one area in Bangalore (or for that matter any city in India)?

  10. Sambaran Mitra says:

    Thanks Ashal for your response (as always).
    If I do not take the home-loan, is there no way I can prevent the tax on notional rent? I find this tax unethical and unjustified, especially when I am housing my old parents there. I am hoping there must be something in the tax law to prevent that.

  11. ashalanshu says:

    Dear Sambaran, in case of 2nd house is purchased with a home loan, you can adjust the full interest amount with out any limit against the deemed rental income.



  12. ashalanshu says:

    Dear Sambaran, this 2nd house ‘ll be purchased by you by self funding or home loan?



    1. Sambaran Mitra says:

      I can opt for either option, whichever is beneficial.

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