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Home loan taxation - let out property

Ashok (MD) (72 Points)

09 March 2016

I am currently living in Chennai in a rental house. I am planning to purchase a construction completed flat either in Chennai or Coimbatore and let the new flat out for rent. (Flat cost is around 70 lakhs)

Can you please clarify if

a) Is my interest tax deduction under section 24 limited to Rs. 2 lakhs or am I eligible for full interest deduction (i.e. if I include the rent I get from new flat income from house property)

b) Can I claim full interest dedcution irrespective of the location of the new flat (Chennai or Coimbatore)?

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4 Replies

Pranay Teja (Student) (60 Points)
Replied 09 March 2016

Sir, You should declare income from new property under let out category. You can claim interest deduction u/s 24 for self occupied property where you are currently living (if it is your own property)

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Ashok (MD) (72 Points)
Replied 10 March 2016

Thanks. Is there a limit on the interest deduction if I do that? Or can I deduct all interest?

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 11 March 2016

As per Section 24, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property.

The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs

In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24.

Case a) You are eligible for full interest deduction.

Case b) Yes location of house does not matter.

Ashok (MD) (72 Points)
Replied 12 March 2016

Originally posted by : Vishal Goel
	As per Section 24, the Income from House Property shall be reduced by the amount of Interest paid on Home Loan where the loan has been taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property. The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed in this case and the taxpayer can take tax deduction of the whole interest amount under Section 24. Case a) You are eligible for full interest deduction. Case b) Yes location of house does not matter.