Owning a vacant second home can attract wealth tax. The tax will be charged on the notional rental income of the property, keeping the market rent of the property’s locality as basis.
Certain concessions are applicable with this regard. Loan pending against the house will be subtracted from the market value of the property. Also, if the house is rented for at least 300 days, no wealth tax is to be paid.
Here are the common reasons where you must cross-check before handing over your income tax return (as published in ET Wealth on Feb 13, 2012):
- Ignoring income from investment in the name of spouse, kids.
- Ending life insurance policy before 3 years.
- Not including interest income in your tax return.
- Selling a house bought on loan within five years.
- Not including ornaments in wealth tax.
- Receiving gifts and cash from persons other than blood relatives.
- Both spouses claiming tax benefit on same expenses.
- Withdrawing PF within five years of joining a company.
- Taking benefit of basic exemption limit twice in a year.