Deduction of interest on home loan

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 July 2012 Hi,

I am having one house in Ahmedabad [on loan] and had been staying in Vadodara on rent...I purchase a flat in Mar-11 for which I availed home loan from bank and paid EMIs through out the year but got possession only in Feb-12...

My queries are:
1. Can I avail the benefit of second loan [I read in this site that interest on loan for second house is fully deductable]?
2. Can I get the HRA benefit for the year? Considering my rent paid for stay in Vadodara/
3. Can I avail tax benefit for the interest paid for the house in Ahmedabad?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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17 July 2012 You are not provided in 2nd house which place. assuming the same in Ahmedabad

1. You take benefit of Interest of 2nd house as full deduction, provided showing as let out property or deemed to be letout property and declaring rental income on that house u/s 24(b)

2. yes. since you are staying Vadodara for employment purpose in rental house, the same rent can be claimed under HRA exemption u/s.10(13A)

3. Since the first house in Ahmedabad,as self occupied ( if not being really let out) you can claim the interest up to Rs.1.50 lakh maximum, since you are not staying that house due to employment reason. incase that house you let out to some one, need to show the rental income and interest can be claimed full amount as actual

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Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2012 Thanks so much Ramesh for the input...

Just wanted to clarify the point you raised...I bought the house at Vadodara and shifted in Mar-12 from the rented house to the new one...

While for the entire FY i.e. from Mar-11 to Feb-12 I was staying on rent but paid EMIs for my new house will the above response change with this new dimension...please confirm.

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 July 2012 As per given details,

You have not restrictions to claim HRA exemption, because you stay in rented house and paying rent and all the conditions u/s.10(13A) satisfied.

But as per Second house in Vadodara, sine you are having house at working place it self. not occupied by you. what is the actual status of the house. is it rented? or simply kept vacant till feb-12?

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Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2012 Hi Ramesh,

I purchased it in new scheme in Mar-11 and till Feb-12 it was getting constructed but I started paying EMI as builder was given money on completion of each stage of construction...I got possession only in Feb-12 and shifted there in Mar-12 till such time I stayed on rent

Hope this will help you in understanding the background...

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 July 2012 I understood. Construction completed during the 2011-12 only. As per Income tax one person can take only one house as Self occupied stauts. all other houses has to be treated as let out or deemed to be let out, and actual rent or notional rent has to be calculated for those houses and declare the income accordingly. Also can claim the actual interest paid for that property u/s.24(b). so Now i can suggest you to decide yourself which house you are going to take status as " Self occupied" either you can choose Ahemadabad house or Vadodara house. option is yours, Which house property coming higher interest, you can take as letout ,other one as Self occupied.

Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2012 Thanks Ramesh!

Confirming my understanding:

1. I can claim the rent under HRA
2. Either of the house should be considered as let out or deemed to be let out and notional rent need to be considered - if I opt for house in Vadodara as second house, the notional rent has to be considered only from the date of possession till 31-Mar-11; in my case it will be for 1 month i.e. Mar-11
3. There won't be any challenge in considering Ahmedabad house as self occupied

Thanks for accompanying me so far and giving this clarity!!

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 July 2012 yes.your understanding correct, for any clarifications further. you can reach me.

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Querist : Anonymous

Querist : Anonymous (Querist)

22 July 2012 Thanks Ramesh! Will reach out to you if stuck...

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2012 Hi Ramesh,

Bothering you again...

I read that interest paid during construction period can be claimed in five successive years starting from the AY in which the construction is completed and the possession of the house taken...

In my case the possession of the house was taken in Mar-12 and so am assuming that the pre-possession tax component needs to be divided by 5 to claim the amount in this year while for one month, the tax can be claimed for this year so the final interest component...

While funishing details in the ITR2 template, there is no such provision...need your guidance on this...as there entire interest component is being asked and gets adjusted...