1. If you own more than one Self Occupied Properties (SOP), you have a choice to treat any one of the properties as SOP. The other such property (ies) which lies vacant will be treated as Deemed Let Out Property (DLOP) under the Act. If a property is treated as a DLOP, it is effectively put at par with a let out property as far as taxation is concerned. Hence, a notional rental value (method to calculate such value prescribed under the Act) is considered as the gross taxable rent for such property. You are allowed to claim a flat deduction of 30% for repairs and maintenance charges.
2. As the benefit of self-occupied property is available for only one home, the estimated annual rent will be considered as the taxable value.
3. In the event that you let out the second house, the actual rent received is treated as the taxable income under the head ‘Income from House Property’.
4. Under the Wealth tax Act, 1957, Section 5(1) indicates that an assessee can hold one property as a self occupied property and the same be exempt from eligible assets liable to Wealth tax.
If an assessee, holds more than one property, then the second property for the purpose of Wealth tax has to be valued as per the Wealth Tax Rules 1958 and the value in excess of Rs. 30,00,000/- is liable to Wealth tax. However if there is any liability against the said asset, the same is to be deducted before computing the taxable wealth.
5. No income tax liability would arise on the purchase of the second property. The liability to pay income tax would arise only in the event you give the second property on rent, in which case the rent earned from it shall be taxable.
6. If your wife is not an income tax payee the you can make her a joint owner of the second flat to avoid being taxed.