Consumers Digest

Doubt on home loans interest tax exemption?

Request clarification on the rule for exemption of Interest on Housing Loan: I have a property in Bangalore , which is self-occupied and I am claiming exemption under Section 24b for the interest on housing loan of Rs.94,500/- I have another house in Chennai, which is rented out and I have decelared the income received from this house. I have acquired a home improvement loan for this property and I have paid interest of Rs.83,800/- on this loan. Can I claim a total deduction of the second interest of Rs.83,800/- out of the net income from property (Rental Income - House Taxes paid - 30% of the rental income)? I presume the limit of Rs.1,50,000/ for Interest on housing loan does not apply in this case. Or, is there a rule that interest on both loans put together should not exceed 1.5 Lacs, i.e., though the total interest is 94,500 + 83,800 = 1,78,300, should I claim only 1.5 Lacs as exmption? Does the interest on loan for the second point, where I am showing rental income also come under Sec 24b, or is it some other section? A further point in question is Rental Income - House Taxes paid - 30% of the rental income amounts to Rs.82,000/- whereas The interest on housing loan for this house is Rs.83,800/- Since the interest exceeds the net rental value, am I allowed full exemption of the interest? Look forward to your clarification. Thanking you,

Public Comments

1. You have to calculate 'Income from House Property' for each house separately. You can treat any house as self occupied and the other as rented. The rent value can be notional. Since the second house is treated as being rented out (notional rent) for income tax purposes, the deduction for interest is not limited to Rs 1,50,000 in respect of the loan taken for this house. The deduction for interest payable on a loan taken to buy / construct house properties (if you have more than one) is not subject to any overall limit. Since you calculate 'Income from House Property' twice, each time you get exemption u/s 24(b). For self occupied property the limit is Rs 1.5 lac. For rented property there is no limit.
2. Besides above I want to add one more point. That you can show 'loss' in both the cases which can be set off against other income of the same year or can be carried over to next year.