Income tax saving from two different housing loans for two different properties?



I have purchased a flat in 2004 and i am claiming for rebate since then in my income tax for hosuing prinicipal and interest component. Recently in 2008 i purchased another flat with a new housing loan. Does the interest component of second flat also be considered for tax exemption including the earlier one?

Please clarify.

Thanks
Sandeep

Income tax saving from two different housing loans for two different properties?
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2 Replies to “Income tax saving from two different housing loans for two different properties?”

  1. Q-1). I have purchased a flat in 2004 and i am claiming for rebate since then in my income tax for hosuing prinicipal and interest component.

    Ans: You are correct.

    Q-2). Recently in 2008 i purchased another flat with a new housing loan. Does the interest component of second flat also be considered for tax exemption including the earlier one?

    Ans: Repayment of principle amount on both the houses are eligable for deduction u/s 80c subject to Max limit of Rs.1 lakh including the other investments in Sec.80C.

    Regarding the interest portion, the house which you using for your own (self occupied), interest paid on that house can be claimed as deduction up to 1.5 lakhs.

    Now let’s say you stay in a self-owned residence and purchase another property. This could be for your parents or for self-occupation. But, it has not been rented out. In other words, this too is for self-occupation.

    This second house cannot be treated as self occupied, since that is the status given the first house and you can claim that status only for one house

    Here is where the favour from the tax department ceases. The tax department requires that you pay tax on the notional rent on at least one of the houses. Notional rent is the rent you would have got had you given the house on rent. As an owner of two homes, you can choose a self-occupied property and the other will be taxed on the basis of notional rent. You can also change your choice from year to year.

    Using the above formula, the income from such a home will be calculated. Since this house is treated as being rented out, for income tax purposes the deduction for interest is not limited to Rs 1, 50,000, you can claim actual interest (It may be 5 lakhs interest or more).

    The interest on the 2nd house is fully exempt as you are renting it out or self occupied. As you are going to pay tax on the rental value, you can claim full interest as deduction from the rental income.






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