What is deemed to be let out property?

Are you a person who owns two or more properties? If yes, then it is mandatory for you to know that you are eligible to pay tax on your properties even if rented or self-acquired. Under income tax if a person who owns more than one property that property is known as deemed property. Let us understand what is deemed let out property meaning in detail.

Deemed let out property meaning in income tax

According to the Income tax rules of India, when a person has more than one residential property in his name, he is considered to be living in only one property and the rest of his residential properties are deemed to be let out property. Such houses will be valued under section 23(1)(a) of the Income-tax Act, 1961. Tax will be levied on all of these houses irrespective of whether the house is vacant or someone living in it.

The whole idea and meaning of deemed let out property is to determine the number of residential properties a person holds and to determine the tax valuations for these houses.

This is all about deemed let out property meaning

 

Ms Neha has rightly pointed out. Deemed let out meaning in Income tax are considered when an individual owns more than one property. I recently discovered this concept after my husband’s demise. He used to take care of taxes and I had no idea about any of it until recently. We have two properties and while filing income tax I got to know about this concept.

We as owner live in a property in Andheri and our other flat in Matunga which is vacant at the moment is categorised as deemed let out property in income tax. I got to know about the deemed let out property rent calculation too when I sat with the CA to understand our taxes. This is what he explained:

The deemed let out property rent calculation is based on Gross annual value - Municipal Taxes = Net Annual value.

When you arrive at the net annual value make the standard deduction under section 24 at 30% and interest paid on housing loan (if any).

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The basic difference between a deemed let out property and a let out property is that in a let out property, the income from rent or consideration received is assessed while tax filing. While any vacant property is treated as deemed let out property in case of an individual who owns multiple properties.

I hope my answer gives more clarity on deemed let out meaning in Income tax and rent calculation on the same.

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Hey Buddy,

According to the income tax statute, the assessee is only permitted to list two residential properties as being self-occupied; all other properties must be listed as being rented out. It indicates that the properties listed after are regarded as let-out house properties. Additionally, the assessee must determine rent using fair market value and pay tax on that amount. Vacant property is another name for deemed letout property.

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I have gone through the above-mentioned response by Neha, and Priety about the let out meaning in property. I completely agree with them. The formula used to determine the presumed let-out property rent is Gross yearly value - Municipal Taxes = Net Annual value. The fair rent for the property is multiplied by 12 to determine the gross annual value.

Also, just to reiterate on

let out vs deemed let out, I would like to say that, A let out property and a deemed let out property differ primarily in that a let out property assesses the income from rent or other consideration received during tax filing. However, if a person owns many properties, each vacant property is viewed as though it were rented out.

What is Let out meaning in ITR:

A taxpayer may only claim one property as self-occupied up until FY 2018–19; all other properties were deemed to be rented out. A taxpayer can, however, claim two properties as self-occupied beginning in FY 2019–20. Those taxpayers who own many properties will benefit from this.

When a property's owner transfers to a third party the right to use or occupy it in exchange for payment, it is deemed to be rented out (rent). However, if a person owns more than one home for residential use, any of those homes may be regarded as self-occupied under the tax laws.

I hope this helps you with your query about the deemed letout property. 

Read More:

What is Let Out Property Meaning in Hindi and English? What is Deemed Let Out Property Meaning?  

I had a friend who owned several different properties. It was through him that I came to know about deemed to be let out property meaning. He told me that he could invest in rental homes to make a consistent living from rent. Only one of the homes can be designated residential for self-occupancy under the income tax provisions; the others can be rented out. And all the other properties were referred to as deemed let out or rent out properties if they are not being used as residences.

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Deemed to be let out house property

A person may possess several properties, but it is considered deemed rent out property when the owner rents out one of them. Only one of these properties will be regarded as residential; the others can be utilised to generate income from rentals.

If a person owns more than one property, any one of them will be taken into consideration for self-occupancy under Section 23(1) (A) of the Income Tax Act of 1961. The other properties will be regarded as rental property even if they are vacant or occupied by others.

Based on the annual worth of these homes as established by Section 23(1)(A) of the Income Tax Act of 1961, tax will be assessed. The annual value in this case refers to the properties' potential for generating money.

Miss Priety and Mr Advaith have quite nicely explained about the difference between let out and deemed let out property. So, I will tell you a little about how taxable income is calculated from deemed let out property.

How to Determine Taxable Income from Deemed Let Out House Property?

Income from Deemed Let Out Property is calculated as per the following steps:

1. Calculate Gross Annual Value (GAV)

   The GAV of an asset deemed to be leased out is the lowest of the following:

- Fair Rent Value (Determined using Annual Rent Value of similar properties in your area)

- Value Ascertained (Determined as per Municipal Tax Value of the property)

- Average Rent (Determined as per Rent Act)

1. Deduct Municipal Taxes Paid

   A taxpayer's property tax is the only thing that constitutes a municipal tax. The full amount of paid municipal taxes may be deducted. It lowers the property's Net Annual Value. If the owner has not made payment, this deduction is not permitted.

2. Calculate Net Annual Value (NAV)

   NAV is nothing but GAV reduced by Municipal Taxes Paid.

Particulars	Self Occupied	Let Out	Deemed Let Out
Gross Annual Value (Generally, total rent received)	NIL	XXX	XXX
Less: Municipal Taxes Paid	Not Applicable	XX	XX
Net Annual Value	NIL	XXX	XXX
Less: Deduction u/s 24 1. Standard Deduction at 30% 2. Interest on Housing Loan	Not Applicable INR 2 Lakh Limit	XX No Limit	XX No Limit
Income from House Property	(XXX)	XX	XXX

I hope now you understand deemed to be let out property meaning clearly.

Read More: What is Let Out Property Meaning in Hindi and English? What is the Maximum TDS on the Rent limit of a Property? 

My family owns 3 houses. One is in Rajendra Nagar and other two properties are in Rohini. We occupy the one in Rajendra Nagar. We have not yet given any of our properties on rent. This year when I was sitting with my father to file the Income Tax Returns, he told me that a deemed let out meaning in ITR is one which is vacant and has not been let out for rental income. 

I was confused but then he further clarified that deemed let out property in income tax is part of the income tax purview in the sense that the property owners pay taxes for the rental income that they may have incurred on said property after letting it out. However, there is one condition for a property to be considered as deemed to be let out. It is that the property must have been rented out for a minimum period of 6 months.

I think it is very important for all of us to know what these terms mean as the scrutiny while filing income tax returns has increased and if anything is misrepresented, it can attract enquiry for the income tax authorities. Meaning of deemed let out property must be clear now. 

You should further know that it is applicable to both residential and commercial properties. 

I hope my answer helps you out 🙂

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Wondering, what is deemed let out property in income tax? Let me highlight that multiple properties can be registered in a person's name. To earn a consistent income through rent, he can invest in residential buildings. In accordance with the income tax provisions, only one of the homes can be designated as residential for self-occupancy, while the others are qualified for rental use. They are referred to as deemed let out or rent-out properties if the other properties are not being used as residences.

What is deemed to let out property?

If a person owns more than one property, any one of them will be taken into consideration for self-occupancy under Section 23(1) (A) of the Income Tax Act of 1961. The other properties will be regarded as rental property even if they are vacant or occupied by others.

Based on the annual worth of these homes as established by Section 23(1)(A) of the Income Tax Act of 1961, the deemed let out in income tax will be assessed. The annual value in this case refers to the properties' potential for generating money.

How to calculate income from deemed let out property?

The calculation of the deemed-let-out property rent is based on

Gross annual value - Municipal Taxes = Net Annual value

The fair rent for the property is multiplied by 12 to determine the gross annual value. 

I hope this helps you with the query about what is deemed let out property in income tax.

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As far as I have researched about deemed let out property meaning, I can tell you that according to the Income Tax Act of 1961 Section 23(1) (A), if a person owns multiple properties, and uses any one of those properties for self occupancy, and the other properties are used by others or are vacant, then those properties will be considered deemed to be rent out. The annual valuation of these homes, as established by Section 23(1)(A) of the Income Tax Act of 1961, will be the basis for their taxation. The ability to generate revenue from these properties is referred to in this context as the yearly value. I will elaborate more on this. What are the Factors to be Considered to Calculate the Annual Value of Deemed to Rent Out Properties?

• Actual rent

One of the factors used to determine the annual value is the amount of rent that is either received or receivable.

• Municipal valuation of the property

The municipal corporation in that locality establishes the property's current valuation. The authority computes the amount of municipal taxes that the owner must pay for the use of their properties.

• Fair rent

The amount that a rentable property can bring in is represented by the fair rent. It is calculated by comparing the rent that comparable—or nearly comparable—properties are bringing in for that neighbourhood. An annual fair rent is determined in this regard.

• Standard rent

According to the Rent Control Act, this is computed as a fixed rent in theory. The rent cannot be raised by the owner above the going rate. It's possible that the property will really collect a higher rent than the average. Now that you knwo deemed to be let out property meaning in detail, I will tell you how to calculate income from deemed let-out property. The formula used to determine the presumed let-out property rent is Gross yearly value - Municipal Taxes = Net Annual Value. The computation of gross annual value involves multiplying the property's fair rent by 12. This is deemed let out property meaning. Get Tenants Quickly and Save Upto 50k on Brokerage With NoBroker Owner Plans. Read More: What is Deemed Resident Meaning: Terms and Clause?