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After 01.04.1995 even deduction for interest is available in respect of unoccupied (vacant) house. In other words such deduction is claimable both for self-occupied as well as for an unoccupied house. This benefit is available not only in the case where an employee stays in a different city but is even possible where he stays in the same city where such vacant owned house property is situated. The Delhi High Court in Commissioner of Income-tax Vs. Avadh Behari Rohatgi (Justice) (157ITR441) in this context held that the reference in the section is to “other place” and not “other town”.

It is however to be shown that by living in the rented house rather than his own house the employee can perform better. For instance the rented house may be closer to the office, which would mean extra hours spent for office or, the employee can justify his stand on some other office compulsion such as maintaining status. In other words some nexus must be shown between the fact of residing in a rented house and the employment, business or profession. On the other hand it can be shown that by living in his own house the employee could not perform his duties well. Thus what matters is the employer’s interest and not mere employee interest or convenience in choosing to stay in a rented house.

However no benefit of deduction of interest would be admissible even if the employee plead that his parents are staying in such other house. Sub-clause (b) of section 23(3) caters to such restriction since in that case a benefit will be derived by such employee.

Also in case the employee owns more than one house it is advisable for the employer to seek particulars of such second or subsequent house, be it is let out or not since the annual letting value of every such house would be taxable and to be considered as part of income from house property before giving any set off benefit of interest paid housing loan against salary income. The employee is supposed to provide particulars of such house(s) and income there from in Form 12C declaration.

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