People now does not buy house as shelter to live in with their family. Instead, they invest in the real estate business to get more profit. However, he has to pay income taxes on the income from house property.
If you own two houses both for your personal use then you have to pay income tax on the one of your choice. That means you have to decide which one to consider as residential property between the two houses you own. The other property will be considered as "deemed to be let out" and the estimated annual rent will be taxable.
Anjan has two houses - one in Bangalore and the other one in Kolkata. He stays at the house in Bangalore and his parents stay in the Kolkata house.
According to the Income Tax Act, Anjan has to pay taxes for his Kolkata house. The tax implemented will be the marketable value of the rent.
If Anjan gives the second home as rent then he has to pay taxes on the income received as rent by him. Suppose, he rents the second home to one of his friends at Rs.20,000 per month. The annual rental income of Rs.2,40,000 will hence be taxable.
However, the case would have been different if Anjan had a farmhouse where he enjoys the weekends with his family. According to the Income Tax Act, the income from building in or near agricultural lands will be considered as exempted.
The tax exemption on the farmhouse will be applicable if he uses the farmhouse for his own dwelling or cultivation purpose or for storage purpose. So, Anjan will enjoy tax exemption if he claims the farmhouse as his residential house.
Click here to read on Tax implications on buying a new home in India.
However, if he keeps the house as vacant then it will be considered as "deemed to be let out" and tax would be collected on the annual rent which he would have paid in case it was rented out.
So, if you have two houses to your own name then you should choose carefully which one to use as residential house. You have to pay taxes for the other house even if keep it vacant provided its not a farmhouse.