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Tax exemption on interest on home loan

shiva (manager) (34 Points)

13 September 2012

Hello:

Here is the summary of my situation and my questions.

The home in which we reside is in my wife's name and we have no loans against it.

We are in the process of purchasing another house.

Both me and my wife are salaried employees and have no other income.

our plan is to purchase the second house in my name and rent it out.

If we borrow money from a bank, is there a limit for the amount of interest I can claim for tax exemption ?

since my wife owns the first home, should my wife also be a co-owner for full tax exemption ?

eventhough the first house is not in my name, can I consider this new purchase as a second home and claim full interest paid for tax exemption ?

If we decide to move into the second home and rent the current home can we still claim full interest for tax exemption ?

appreciate your response ?

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8 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 13 September 2012

Dear Shiva, as pointed by you the first house is in the name of your wife and te new house would be in your name. So all the tax emeptions/income from property would be assessable in the hands of the respective owners as it is the owner in whose hands the income/exemptions would go.

As both of you have only one house in your each name, then you can claim exemption on acount of interest paid on the laon taken for your house maximim upto Rs 1.50lacs only.

If you decide to rent the first home which is in your wife's name then teh rent recievable would be taxable in the hands of yoru wife as she is the owner of that house. She wold however get the deduction on account of municipal taxes paid from the rent received during the year & on the balance a std dedn fo 30% can be availed.

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Arif Ali (Apt Co Advisory) (1230 Points)
Replied 13 September 2012

both of you will get the benefit of maximum interest allowed of Rs.150000 u/s 24 seperately.

and due to this ur house property income will come to loss and ur wife will have income if you let out the first house.

for further clearance you may reach me at moh.arif4cas @ hotmail.com

CA Manish (Job) (5264 Points)
Replied 13 September 2012

Originally posted by : Giridhar S Karandikar
	Dear Shiva, as pointed by you the first house is in the name of your wife and te new house would be in your name. So all the tax emeptions/income from property would be assessable in the hands of the respective owners as it is the owner in whose hands the income/exemptions would go. As both of you have only one house in your each name, then you can claim exemption on acount of interest paid on the laon taken for your house maximim upto Rs 1.50lacs only. If you decide to rent the first home which is in your wife's name then teh rent recievable would be taxable in the hands of yoru wife as she is the owner of that house. She wold however get the deduction on account of municipal taxes paid from the rent received during the year & on the balance a std dedn fo 30% can be availed.

The limit of Rs 150000/- won't be applicable if the house will be given on rent.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 13 September 2012

There is no loan going on the home whihc is in his wife's name. and the home in which is taken on loan and they are planning to stay will be SOP so interest upto 1.50lacs only can be claimed

CA Manish (Job) (5264 Points)
Replied 13 September 2012

Q. of Mr. Shiva

our plan is to purchase the second house in my name and rent it out.

If we borrow money from a bank, is there a limit for the amount of interest I can claim for tax exemption ?

In this case there won't be limit of Rs 150000/-.

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shiva (manager) (34 Points)
Replied 13 September 2012

Thx for all your responses.

Most of them feel that since it is the first house in my name, I can avail income tax exemption for only 1.5 lakhs of interest amount. whle a few of you feel there is no limit ?

is it safe to assume that if we decide to register the second house in my wife's name (or make it a joint ownership registering in both our names) and rent it our instead of registgering in my name, then there will be no limit on the income tax exemption I can avail on the interest amount ???

CA Manish (Job) (5264 Points)
Replied 13 September 2012

Originally posted by : shiva
	Thx for all your responses. Most of them feel that since it is the first house in my name, I can avail income tax exemption for only 1.5 lakhs of interest amount. whle a few of you feel there is no limit ? is it safe to assume that if we decide to register the second house in my wife's name (or make it a joint ownership registering in both our names) and rent it our instead of registgering in my name, then there will be no limit on the income tax exemption I can avail on the interest amount ???

The limit does not depend on that whether it is first house or second house. limit is applicable only if the house is self occupied if the house is given on rent then there wont be any limit irrespective of the fact that whether it is first house or second.

Varshit Shah (Self Employed) (676 Points)
Replied 13 September 2012

Dear Mr.Shiva

When you give your house on rent , whatever income derives from such house will be taxable in the hands of the person who is the owner of that house. In your case if you buy New House in your name , & give it in on rent that Rental Income will be taxable in your hand. Simultaneously as this house is on Rent & you took the loan , whatever Interest you have paid during the year , ENTIRE AMOUNT of Interest can be claimed as deduction . ( limit of 1.5 lacs applicable only when you yourself use the house. In terms of Income Tax act when the house is Self Occupied Property ) With Interest factor you can also calim the portion of PRINCIPAL AMOUNT paid under 80C (upto 1 lac if there is no other investments ).

Your wife can not be treated as co-owner unless and until you put her name in the Purchase Agreement.

As this is YOUR first House , this will not be treated as Second House because your wife also owns one house. but if you are the co-owner of the property held by your wife , then this new property will be treated as your second house.