Budget 2023 expectations of homebuyers: Currently, even vacant properties are taxed as if they are let out, which leads to unnecessary litigations.
Even vacant property is taxed as let out. Budget 2023 should change this, says ICAI
Budget 2023 expectations of homebuyers: With increasing income and the availability of easy-to-buy residential properties, several individuals are now owning more than one self-occupied property. Some like to rent out their property for extra income. Many times, such properties remain vacant. However, even vacant properties are taxed as if they are let out, which leads to unnecessary litigations.
The Institute of Chartered Accountants of India (ICAI) has recommended that the upcoming Budget 2023 should provide clarity on the above matter. Here’s a look at what the ICAI said and what it has recommended:
What ICAI said
“Vacant property even if given on rent in the earlier year is being taxed as deemed let out and a notional income is being attributed to such a property. The increase in the number of self-occupied properties has been increased to two to encourage the real estate industry. However, the restriction on the number of self-occupied properties to two may be relooked and revisited,” ICAI said in its Pre-Budget Memorandum 2023.
“No prudent business person will invest in a property and not seek a return on his/her investment unless it is being used for self-occupation either when on business or for leisure. It should be the prerogative of the assessee to decide the number of properties he can hold,” it added.
What ICAI recommended
The ICAI has recommended that the provisions of Section 23 (1)(c) should be elaborated in order to avoid unnecessary litigation.
“The provisions of Section 23(1)(c) need to be elaborated and an explanation inserted to avoid unnecessary litigation. Even though the section is very clear, the department continues to tax a property that is lying vacant even though it was rented out in the previous year,” ICAI added.
Relief for builders
The ICAI has also recommended certain changes in the law to provide relief to builders and developers holding unsold properties as stock-in-trade. Currently, unsold property held as stock-in-trade is taxed on a notional rental income basis.