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I own one flat (Staying in same flat) for which I am claiming tax benefit on home loan. Recently, I have purchased one more flat, can you please tell me how can I claim the tax benefit for the home loan? (The loan amount is 15L only)

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For the Second House, you can claim "Interest" on housing Loan to unlimited amount. You should have taken possession of the house. There is no benefit for Principal repayment. You would have to show actual rent or notional rent, property tax and then deduct interest payments. See below for calculation.

a "Annual letable value or rent received or receivable (higher of the two, if let out for whole of the year, lower of the two if let out for part of the year)"
b The amount of rent which cannot be realized
c Tax paid to local authorities
d Total (b + c)
e Annual value (a – d) (nil, if self -occupied etc. as per section 23(2)of the Act)
f Annual value of the property owned (own percentage share x e)
g 30% of f
h Interest payable on borrowed capital
i Total (g + h)
j Income from house property (f – i)


Illustration:
a. Property let for rent at Rs 10,000 per month. Yearly 1,20,000/-
b. Tenant has defaulted and not paid for 2 months. Loss of Rs 20,000/-. Tenant is now evicted or is in process. Legal notice served etc.
c. Property tax to Municipal Corporation. Yearly Rs 10,000/-
e. Annual Gains from Property 1,20,000 less of Rs 20,000 and less of Rs 10,000. Property Gain of Rs 90,000/-
g. Misc expense to up keep the property. No receipt required. Standard 30% of income received. i.e. 30% of 90,000 [Assume 30,000 for simplicity of calculation]
i. Interest paid on loan for the year, say 40,000.
j. Total Gain on Property Rs 90,000 less of Misc exp Rs 30,000 and less of interest Rs 40,000. Final Value Rs 20,000

Thus you would need to pay tax on Rs 20,000 only.

Note: For point a; If you have not rented the house [or rented at nominal rate] you have to show that you received Notional rent as per Govt Ready reckoner rates.

  • As i understand total interest paid in the year - ( B & C ) can claim but can you please tell what do you mean by "The amount of rent which cannot be realized" & Tax paid to local authorities? – Petes May 24 '16 at 7:04
  • @Petes see illustration. – Dheer May 24 '16 at 7:51

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