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Discussion > Income Tax > Tax queries >

Exemptions on house property

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Self Employed

[ Scorecard : 25]
Posted On 01 June 2012 at 13:04 Report Abuse

Hi

1. I own an apartment (with my wife as co-owner)which we have let out and on which the home loan has been paid-off.

2. Currently we stay in a rented apartment on which my wife claims tax deduction on House rent paid.

3. We are contemplating buying another house (as an investment) in a different city.

 

I would like to know whether:

a) I can claim tax exemption on interest paid for purchasing the new apartment and if yes, to what extent?

b) Can I continue staying in the existing flat on rent and show our owned property (old house on which home loan has been paid and the house is now rented out)as a self occupied property?

c) So, effectively, can we continue to claim tax exemption on House rent paid as well as the interest paid on home loan to be taken for purchasing the new property?

Would appreciate any help from you. Thanks.


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Giridhar S Karandikar
Team Lead

[ Scorecard : 2834]
Posted On 01 June 2012 at 13:37

Mr Wakankar. Please note that if an assessee owns more then one house, then one of his house can only be considered as Self-Occupied & the remainig house(s) shud be consdiered as deemed to be let-out property.  On this DLO property rent is to be calculated at teh Fair Value oign on the adjoining areas.  however for this you will get deduction towards municipal taxes paid, from the rent received & on the balance amount 30% Std Ded & interest on home loan actually paid/accrued during the financial year.

coming to your questions now:

1] You can consider the house on which you have paid the home loan as self-occupied, as there is no other tax beenfit available for this property.

the new property which you will be purchasing can be shown as DLO property, as for this proprty there will be no limit on the interest deduction, so you can claim the entire interest paid/accrued during the F.Y. as a deduction from the rent received.

2]. Yes you can continue to claim tax exemption on account of HRA & as well interest paid on home loan





Dharmakirti Wakankar
Self Employed

[ Scorecard : 25]
Posted On 01 June 2012 at 16:41

Dear Mr. Karandikar

Thank you for your quick response. Really appreciate it.

 

Kind regards.




Balaji Ramani
Sr. Manager

[ Scorecard : 33]
Posted On 11 June 2012 at 21:04

Actually, this is a question for Mr. Karandikar:

If one of the properties is to be shown as 'self-occupied' and the other new property is shown as DLO, then where is the question of claiming HRA benefits? 

I don't think you can claim HRA benefit if you show at least one property as 'self-occupied'....

Pls. clarify.




Giridhar S Karandikar
Team Lead

[ Scorecard : 2834]
Posted On 11 June 2012 at 21:15

Mr Balaji, please refer the 2nd question asked by mr Dharmakirti.  On that basis I have given the answer.




Balaji Ramani
Sr. Manager

[ Scorecard : 33]
Posted On 11 June 2012 at 21:28

Yes, sir.  My question was based on that basis only:

According to Mr. Wakankar,  he wants to show the owned property (rented out) as 'self-occupied' - so he cannot/need not show rental income.

But if he does that, how can he or his spouse claim HRA tax benefits?  HRA is deductible only when you live in rented accomodation.

1)  Mr. Wakankar can either show the property as 'self occupied' and forgo HRA deductions (but will gain from the rental income he need not show)  

OR

2) He shows that he owns a property that is rented out and the rental income (income from House Property) and also shows his rental accomodation to claim HRA benefits.

 

He needs to calculate the pros and cons of both options and has to choose the best one, right?  Let me know if my thought process is correct.  




Giridhar S Karandikar
Team Lead

[ Scorecard : 2834]
Posted On 11 June 2012 at 21:47

Mr Balaji, as per the questions there are in all three properties.  Out of that two are owned & one is rented. Out of the two owned property one is requried to be shown as SOP & other as DLOP.  Now Mr wakankar apart from these two properties wants to still stay in a rented property on whihc he is paying rent.  so he claim all the tax benefits i.e HRA as well as interest.  I thnk the question asked by Mr Wakankar is quite clear.




Balaji Ramani
Sr. Manager

[ Scorecard : 33]
Posted On 11 June 2012 at 21:51

Mr. Karandikar,

 

Thanks for your patience and explanation.

 

But my question still goes unanswered...Can you still claim HRA deduction after showing a 'self-occupied' property?  When you show a SOP, automatically don't you lose the HRA deductions as there is no rent paid?




Giridhar S Karandikar
Team Lead

[ Scorecard : 2834]
Posted On 12 June 2012 at 11:19

mr Balaji, yes you can claim exemption for HRA.  the only condition as per section 10(13A) is that the assessee should pay rent to claim the exemption.



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