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Here's a Good Joke: New Income Tax Data Shows India Has Only 20 Lakh Landlords

May 4, 2016


In yesterday's column I had mentioned that only around 26 lakh Indians (to be precise the number is 26,01,777) filed for income from house property under the individual category, for the assessment year 2012-2013.

During the assessment year 2012-2013, income tax returns for the income earned during the year 2011-2012 had to be filed. A total income of Rs 29,927 crore was declared under this category.

Of this around 6.06 lakh individuals showed an income of less than zero from house property. This would primarily include people who have taken on a home loan to buy a house and are repaying it. During the financial year 2011-2012, an interest of up to Rs 1.5 lakh, paid on a home loan, in case of a self-occupied house, could be set off while calculating taxable income.

This meant that an individual repaying a home loan on a self-occupied house, could show a negative income of up to Rs 1.5 lakh when it came to income from house property. These are the individuals showing negative income against their house property. This negative income could be set off against taxable income and the taxable income could bethus brought down.

Further, the limit of Rs 1.5 lakh applied only to self-occupied property and not on other homes that a tax payer may choose to buy by taking on a home loan. Any amount of interest paid on such home loans can be claimed as a deduction as long as a "notional rent" is added to the income.

We all know that over the last few years the "rents" have been very low in comparison to the EMIs that need to be paid in order to repay the home loan. The rental yield (rent dividend by market value of the home) is in the region of 2-3%.

Even after deducting a notional rent, the interest component tends to be massive during the initial years. Hence, the difference between the notional rent and the interest paid is negative. This essentially means income from house property is negative. Such individuals who own more than one home financed through a home loan, also earn a negative income from their house property. This negative income helps people with two or more homes, claim huge tax deductions.

This "deduction" has been used over the years by well-paid corporate employees to bring down their taxable income. Further, individuals who use this deduction benefit on two fronts-tax deduction as well as capital appreciation.

Even if, the capital appreciation is not huge, such individuals are happy in claiming just the deduction than actually making money from an increase in price. Hence, they may not sell the flat, even in a scenario where prices may be falling and thus prevent a faster fall in home prices.

Getting back to the point, there were only 6.06 lakh individuals in the assessment year 2012-2013 who had an income of less than zero or a negative income from house property. As I said, these are people essentially repaying their home loans. The interest they pay on their home loans can be set off against taxable income.

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It is worth asking here that does India have less than 6.06 lakh individuals living in self-occupied homes on which home loans are being repaid? Something just doesn't add up here. Honestly, this is bizarre.

As a newsreport in The Economic Times points out: "In 2011, the number of accounts was 47.32 lakh, which went up to 47.78 lakh in 2012, with the disbursed amount also increasing from Rs 2.5 lakh crore to Rs 2.6 lakh crore."

If the banks had close to 47-48 lakh home loan accounts in 2011 and 2012, why are only around 6.06 lakh showing up in the income tax data?

Also, around 19.95 lakh people declared an income from house property in assessment year 2011-2012. This is another extremely low number. What does this mean? It means that the number of individuals in India who are earning a rental income from their homes (real as well as notional) is around 20 lakh. How is that possible? It means is that there are around 20 lakh landlords in the country, if the data from the Income Tax department is to be believed.

It is worth recounting here something that Akhilesh Tilotia writes in The Making of India based on the 2011 Census data: "India's households increased by 60 million to 247 million from 187 million between 2001-2011. Reflecting India's higher 'physical' savings, the number of houses went up by 81 million to 331 million from 250 million. The urban increases is telling: 38 million new houses for 24 million new households."This means India had 331 million or 33.1 crore houses in 2011. Now compare this with the fact that there are around 20 lakh individuals earning a rental income from their homes. This comparison clearly tells us how low the 19.95 lakh number, really is.

There are two things that become clear here. One, is that many individuals are just buying up homes as an investment and not putting it up on rent. Anshuman Magazine, chairman and managing director of CBRE South Asia Pvt. Ltd., in a 2015 article wrote that "around 1.2 crore completed houses" are "lying vacant across urban India".

Further, this is a clear indication of the fact that most landlords are getting their rents paid in cash and not paying any income tax on it. It also leads to the question where did these people earn the money to build these houses in the first place?

Here is another interesting data point-Of the 19.95 lakh who have some rental income, around 14.55 lakh have an average rental income of around Rs 60,000 per year or Rs 5,000 per month. This number is very low as well.

The point being a major part of the black money in India continues to be generated in the real estate sector. The general impression we have had up until now is that black money is generated when real estate is bought and sold. Nevertheless, with this new data it is very clear, that black money is generated even when real estate is rented out.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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12 Responses to "Here's a Good Joke: New Income Tax Data Shows India Has Only 20 Lakh Landlords"

krishnan vc

May 9, 2016

I think the government has rectified a number of anomalies mainly with regard to the House peoperty analysis. The new IT returns require complete details of all exemptions requested for by the employee which needs to be filed with the Department by the Employer for lower deduction of Tax or even exemption of tax.


A Pereira

May 7, 2016

The research and the resultant report by Vivek Kaul is quite confusing to be honest.
Instead, some of the interesting areas that the author or the Equitymaster's highly capable team could attempt to research are:
1. There are less than 200 assessees declaring income greater than Rs 10 crores - a review of top 500 company balance sheets will perhaps give you numbers far greater than this, those who get salary, commission, allowances etc in excess of IT exemption limits.
2. Instead of looking at the housing loan numbers (most of these are taken by people with incomes either below exemption limits or in the lower income categories), do a research even in just 5-6 big cities, obtain the ownership records of all luxury flats, RE properties costing over Rs 50 lakhs, you will also get many hiding assessees owning two or more houses, in their names, their spouse, children's names! This action will bring out the black money aspect into the open. How to do it? I presume Equitymaster knows how as it is not some rocket science.
3. Similarly, make a full list of owners of big, foreign cars costing over 25 lakhs and check if their incomes are properly disclosed. IT department is either not doing this, or some CA or IT officer helping them out to hide.
4. Likewise, the politicians, gold-jewellery shops, supermarket owners, hoteliers etc etc.

Focusing on big fish can help the country have a better meal than worrying about the under-par housing loan, middle-class paupers (who are already harassed enough by the government through different departments!)


Praful D Mehta

May 5, 2016

All salary employees does not file income tax return because they take deduction through their employers and even after deduction there is a tax payable then their employer deducts tax at source and pays to the govt.
How many people is in service like Banks, Govt(state and central) railways and many other sectors? If you find out the data of salary people then it will be easy to analyse the housing loan data. Also income tax return filing was not compulsory at that time and so If you have paid tax by way of tds or your income is below taxable income limit,many persons were not filing income tax return.
i was a Bank employee before 2009 and in Bank maximum employees were taking housing loan. They were taking deductions and they were either below taxable income level after deductions or they paid tax to employers (bank). Many employees were not filing income tax return as income tax return filing was not mandatory. Same thing might have happened in other sector i think that TDS may contain many housing loan takers data and it should be analyse. When income tax return filing was made mandatory ?.



May 5, 2016

Very confusing article from Mr. Vivek.It is not understood what he wanted to covey to the readers?Whether article is meant for tax authorities or for investor.

Like (1)

Monita Mehra

May 5, 2016

I have been like your articles on Income Tax being paid and all the further analysis you have been writing about, it is a reflection on the character of our nation and us Indians, these are things that make me ashamed to identify myself as an Indian as cheating seems to be part of our DNA. Can there be growth in a country where its inhabitants are without character and don't believe in contributing to the growth of the nation. It is a sad state of affairs and is reflective across all segments.
They take pride in saying they avoid paying Income Tax and know all the tricks and if they don't their CA's help them with the same. Each one needs to realise their responsibility as nothing else can make a difference, rest all is going to be slow and probably work negatively as logically the tax authorities will get behind the honest payers as usual.
They need to start first from checking whether anyone today purchasing a house of 50lacs plus on their income and past tax payments and accordingly register, same goes for ones purchasing cars, etc, etc. Separate for each category, etc.

According to me, an integrity test should be conducted before certifying an individual as a Chartered Accountant and Tax Consultant, at least they can guide their clients rightly or refuse to take their cases. It all boils down to integrity of us Indians and to add to that unfortunately most Indians also suffer from Me First Syndrome.

Like (1)


May 5, 2016

No of assesses claiming exemption of HRA should give a count of no of landlords. This figure would be higher than 20 Lakhs I would guess.

Is it a case that assesses especially salaried class are unaware of this provision?

Like (1)

Sarat Palat

May 5, 2016

What is happening is all a "Tamasha". Every one knows what is happening. The people buying/investing in real estate, the IT Dept., the Government all in the same boat. This will continue for ever. No point in wasting time to do the research and reading it.

Like (1)


May 4, 2016

Under-construction properties are not eligible for deductions towards interest component of EMI from their income & are not declared in their income tax return.

Of the 48 lakh home loan accounts with banks, it would be interesting to split this figure into two categories:
a) fully disbursed loan accounts on completed properties which are eligible for deductions; these are expected to be accounted for in the 26 lakh individuals who declared income from house property in their IT returns
b) partially disbursed home loans on under-construction properties which are not declared in IT returns

Like (1)


May 4, 2016

As per my CA if you are not renting your second home then also you need to show income from that home in income tax return.

Like (1)

Rajinder Shergill

May 4, 2016

Dear Sir,
Itz really shows a sorry state of Tax payers, in our society people does not like to pay tax even if they are earning good package, The reason is the It dept,s official are only behind of them and try to squeeze more money from them, those who all are paying their due honestly. As far as black money concerned in the reality sector. it can be stopped by creating new system such as National Data base by the Govt. where it should be made mandatory for each and every individual of Indian citizen to declare/feed the data of their residential location and other residential property held by them any where in India other than villages in the system. This will break the flow of black money. There should be dead lock for every one not to have more than two property at any urban location. This will put break in such system(Black Money) There are so many people has more than 10 flats and commercial properties in cities. and earning so much of wealth through these un-declared wealth creation means. but not paying single penny to the IT. The govt. officials themselves are also corrupt they play malpractice, Just see the case of declaration of their asset held by govt officials, Govt. announcement made it mandatory for all officials to declared their asset. But happens? has they followed up, very few. The govt has not even tight their noose around them those who has not declared their asset till todate, than how people will become honest towards govt.Every year one or two official are arrest for appropriation of asset/wealth than cases run in courts for years and the result is always known the official win the case and are re instated with payment of huge lump sum. Why they are re-instated, once any one found guilty of such practice. They should be thrown out and dismissed from service. no more case running or court hearing. There are so many possible ways. Will the govt do this, no way only verbal and papers works are done nothing else.

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