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Second home: interesting question

Pradeep Kumar (director) (65 Points)

13 December 2012

I would like to know, if I do not have any outstanding loan against Property 1 (closed by making pre-payment), can I still consider Property 2 as second property and take no-limit interest deduction?

So, from the following, will it be 2.A or 2.B?

1) Property 1 - No loan, No deductions, No rental income, self-occupied
2) Property 2 – under construction

2.A) No principal deduction and no-limit interest deduction + add rental income (as this is still second property)

2.B) 1 Lakh principal deduction and 1.5 Lakh interest deduction (considering I have only one home loan)

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2 Replies

CA Lukesh Sethi (CHARTERED ACCOUNTANT) (150 Points)
Replied 13 December 2012

Dear Pardeep,

You can choose any property self occupied as per your discretion and other properties will be deemed to be let out.

As per section 23(2) of the income tax act, 1956, an assessee can claim the concession only in respect of one residential house property.and all other house will be treated as deemed let out houses.

So alternative propoerty chosen can change from one year to another year depending upon the benefit available to assessee. therefore you can choose any property self occupied or let out as per your benefit.

Regds

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Pradeep Kumar (director) (65 Points)
Replied 15 December 2012

Originally posted by : lukesh

Dear Pardeep,

You can choose any property self occupied as per your discretion and other properties will be deemed to be let out.

As per section 23(2) of the income tax act, 1956, an assessee can claim the concession only in respect of one residential house property.and all other house will be treated as deemed let out houses.

So alternative propoerty chosen can change from one year to another year depending upon the benefit available to assessee. therefore you can choose any property self occupied or let out as per your benefit.

Regds

Thank you for your reply.

Can you also tell me my best option to maximize my tax savings? This property is under construction and will be ready in 3 years. Appreciate all your help!