Answer

1. F

   Facts

   The rented flat is let out and taxed on rent. Between the flat you live in and the vacant one, both can be self-occupied since the limit is two. If you owned one more vacant house, you would choose which to treat as deemed let out.

2. P

   Provisions and law

   • Sec 23, Income-tax Act 1961Annual value rules: up to two self-occupied houses have nil annual value; others are treated as let out at expected rent
   • Sec 24(b) (now Sec 22(1)(b))Deduction for interest on a home loan; ₹2,00,000 cap for self-occupied houses under the old regime
3. A

   Analysis

   Self-occupied status gives nil annual value but caps loan interest at ₹2,00,000 in total for both houses under the old regime. A deemed let out house is taxed on notional rent but gets full interest deduction and 30%. If one vacant house has a large loan, treating it as deemed let out can sometimes give a loss that is better than a nil value. Compute both ways before choosing.

4. C

   Conclusion

   1. 1List each property's expected rent and loan interest.
   2. 2Compute tax under different choices.
   3. 3Pick the combination with the lowest tax.
   4. 4Keep the working for your records.

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