Tax benefit question

Q: I am planning to buy 2 apartments, both for investment purpose and would be taking loan for both of them.

I get to understand that the first one is always deemed self-occupied and hence tax benefit of 1L for principal and 1.5L for interest paid is given. Is this true even if the property is not self-occupied and not given on rent?

What will be the tax benefit would I get for both the apartments?

Keshav Rama Murthy, Bangalore

26th January 2014

Home Loan in Marathahalli ORR, Bangalore

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Replies (5)

If your property is not self occupied and also not given on rent, still you will get deduction in respect of housing loan interest up to Rs. 1.5 lakhs. If your second house property is given on rent, in that situation the entire interest on the second house will be deducted from the rental income.

Subhash Lakhotia,

25th March 2014

Comment

Thank you so much for your response.

My thoughts have slightly changed and I am looking to buy only one apartment and this is my first one. I will be letting this out on rent. How would the tax benefit work in this case? Will it be capped 1.5L (as in self-occupied) or no maximum limit?

Thanks again.

Keshav Rama Murthy, Bangalore

9th February 2014

Comment

Hi Mr Murthy,

yes, i believe that you will get home loan benefit s of 1 lakh pricipal amount. but since the property is not self occupied as per Section 24 of the income tax act there is no maximum limit prescribed for interest paid deductions.

The rent will still be taxable in your hands...

Anusha, Bangalore

18th February 2014

hi,
as far as i know, you will get tax benefit of 1 lakh on principle amount and 1.5 lakhs on interest paid in case of self occupied property. considering that your first property is considered self occupied. For the second property, since it is not self -occupied, there is no maximum limit prescribed. But the rent that you receive will be taxable in your hand.
this is to the best of my knowledge, you can consult a CA for more explanations.

anusha, Bangalore

28th January 2014

Comment

Anusha & Manjunath, Thank you for your kind response.

Maybe my question was not so clear.

Both the apartments are ready to move in. I am currently staying in my in-laws place. In this scenario, what would be the tax benefits I can claim for both the apartments which would be given on rent.

Keshav Rama Murthy, Bangalore

28th January 2014

Comment

Hi Mr Murthy,
If the property is under- construction, you can claim HRA benefits as well as tax benefits only on the principal amount paid. Only after the completion of the property can you claim the tax benefits on interest paid up to the date of completion in five equal installments in five years beginning from the year of completion.

if the property is completed and ready for possession, then you can claim HRA and tax benefits on principal and interest paid.

Anusha, Bangalore

27th January 2014

Comment

Hi, You are right Anusha, But i think that in case when the property is ready for possession, but the owner is still not staying there and has not given on rent also. He still has to pay tax on a notional rental income. However, im not too sure on this and would suggets that you ask a legal expert or consult a CA.

Manjunath, Bangalore

27th January 2014