Tax Exemption for Property Under Self-Lease Scheme

Our employer has a unique staff quarter scheme. We are eligible to lease out our existing flat to the company for which we are paid lease rent and the company allots the same flat to us as a company provided accommodation. It calculates the perk value of such rent free accommodation and calculates our tax liability accordingly. I have taken a home loan to acquire our flat which I own and am staying in under the above scheme.

In the calculation of “Income from house property” will this property be treated as “self occupied” or as “rented out”? Can I claim deduction of the full interest paid on the housing loan, without restricting it a maximum of Rs.1,50,000.

The scheme outlined by you is quite popular with some PSUs and is referred to as “self lease” scheme. The property will be treated as a rented property and its income will need to be calculated accordingly. Click here for details. The detailed technical explanation is as follows:

The definition of self occupied property is given in Section 23(2) of the I-T Act which is subject to the provisions of Section 23(3). Section 23(3) provides that “if the house is actually let’s during the year, or any other benefit is derived by the owner there from” -then such a house cannot be considered as a self occupied house property. The relevant case law in this respect is D.R. Sundar Raj Vs. Comm. Of I.T. {123 ITR 471 (AP)}.

You can deduct the entire interest payable on a loan taken to acquire such a property (without any limit) as well as a standard deduction of 30% of the annual value.

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