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ITR filing in case you own multiple flats and pay EMIs for loans taken

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I have a building consisting of three small independent flats. All the flats are let out to different tenants. For construction of this building a single construction housing loan was taken. I also pay single property tax for the entire house. If I use ITR-2, I will have to divide my home loan EMIs and property tax amongst all the three flats, which is not possible, because it is calculated as a whole. But, if I use ITR-1, I can easily include pre-moratorium interest, home loan interest, Property tax, etc., without having to break the same in three parts. I can also club rent for all the three flats. Can the building (with three flats) be treated as one house property so that I can use ITR-1 instead of ITR-2? (Name withheld)

For the purpose of capital gain exemptions various judicial authorities have held that a single house consisting of various units can be treated as one house provided the same is used as a single residential unit by the family. In your case since the three let out flats are not used as a single residential unit but are used as independent units, the same cannot be treated as one residential house for the purpose of offering rental income. Moreover, the ITR forms also require you to provide details of various tenants in case the property is let out, it would be improper on your part to offer the total rental income as received for one house looking at the fact that the same is used as multiple residential units and are let out to different tenants.

Even though you had taken a single home loan and are paying single municipal tax, it is not impossible for you to allocate the interest and municipal taxes on some rational basis. You can either use the carpet/built up area of each units as a basis for allocating the interest and municipal taxes. Alternative you can obtain valuation of each of the three units and allocate both these items in the ratio of respective valuation of these units. The basis of allocation adopted should be logical and consistent year after year.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.

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