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Home loan exemption on letout houses (2nd & 3rd)

Ra Tax (Se) (12 Points)

26 March 2017

Hi, I have read many forums but could not get clear answer for the followings. Per 2017 budget, Interest from the Home loan of the house which you have given for rent is tax exempted upto 2lakhs. - in case of joint loan by 2 people, is the tax exemption amount 1lakh per person or 2lakhs per person. - is the home loan tax exemption amount limited only for 2 properties (one own home and one let out home); or one can invest on any number of properties and enjoy similar tax exemption - is the home loan exemption applicable only for residential buildings or it is applicable for commercial buildings too? Also what about if it is semi commercial building? Thanks in advance for your help.

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19 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017

1. "Interest from the Home loan of the house which you have given for rent is tax exempted upto 2lakhs."

No, Section 24(b) allows full interest paid as deduction for RENTED house property.

2. "in case of joint loan by 2 people, is the tax exemption amount 1lakh per person or 2lakhs per person"

In case of Rented property this limit doesn't exist. For SOP 2 lakhs for all the co-owners.

3. "is the home loan tax exemption amount limited only for 2 properties (one own home and one let out home); or one can invest on any number of properties"

No barrier of number of properties, if you can avail home loan. Crieteria is ONE Self occupied, rest all rented or deemed rented.

4. " is the home loan exemption applicable only for residential buildings or it is applicable for commercial buildings too?"

Generally all the rental income from properties treated as investment is treated as Income from House property and hence deduction u/s. 24(b) can be availed. (In some specific cases where the property is business asset or stock in trade, it may differ)

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017

As per Amendment FINANCE BILL, 2017

"Section 71 of the Act relates to set-off of loss from one head against income from another.

In line with the international best practices it is proposed to insert sub-section (3A) in the said section to provide that set-off of loss under the head "Income from house property" against any other head of income shall be restricted to two lakh rupees for any assessment year.

However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent years in accordance with the existing provisions of the Act.

This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years."

This restriction of set-off of loss is in aggregate loss under house property head and not just propertywise.

anuj saxena (officer) (37 Points)
Replied 26 March 2017

we have a plot in the name of my father who is now government retired person as now we want to construct a house where we are going to avail home loan where I will be the first holder and my father will be second holder as no bank providing housing loan to him individualy he crossed 60 years
now my query is that in the housing loan repayment will be done by my father pension amount then in future can I claimed for tax rebate for the same in future as well as my father or only one person can avail the benefit of tax rebate

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017

@ anuj saxena: Properly drafted agreement to hold you as co-owner of the house to be constructed, will solve all your problem. You both jointly and /or individually will be able to pay and claim the interest deduction.

anuj saxena (officer) (37 Points)
Replied 26 March 2017

thanks sir

Ra Tax (Se) (12 Points)
Replied 26 March 2017

Thanks for the detailed answer Sir.

About the answer 2: Do you mean 2lakh exemption is applicable for each co-owner? So in case of 2 co-owners 2lakh + 2 lakh exemption; is that correct?

Ra Tax (Se) (12 Points)
Replied 26 March 2017

Thanks for your response sir. But, this legal english is not clear to me sir.

Assume that, I own 2 rented properties (property A and B), both having home loans. For Property A, I am paying 4lakhs interest per year. For Property B, I am paying 3lakhs interest per year.

Before 2017 amendment, i could have claimed the whole 7 lakhs for tax exemption. But because of this 2017 amendment, which of the following option is true

Since i am the owner for both the propery, out of the total of 7 lakhs interest, i can claim tax exemption only for 2lakhs and for the rest of 5lakhs, i need to pay tax (OR)
For propery A: Out of 4 lakhs, i can claim exemption for 2lakhs. For property B: Out of 3 lakhs, i can claim exemption for 2 lakhs

This will help in me understanding this.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017


	About the answer 2: Do you mean 2lakh exemption is applicable for each co-owner? So in case of 2 co-owners 2lakh + 2 lakh exemption; is that correct?

Correct but FOR SELF OCCUPIED PROPERTY!!!

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017


	Assume that, I own 2 rented properties (property A and B), both having home loans. For Property A, I am paying 4lakhs interest per year. For Property B, I am paying 3lakhs interest per year. Before 2017 amendment, i could have claimed the whole 7 lakhs for tax exemption. But because of this 2017 amendment, which of the following option is true Since i am the owner for both the propery, out of the total of 7 lakhs interest, i can claim tax exemption only for 2lakhs and for the rest of 5lakhs, i need to pay tax (OR) For propery A: Out of 4 lakhs, i can claim exemption for 2lakhs. For property B: Out of 3 lakhs, i can claim exemption for 2 lakhs This will help in me understanding this.

You have two confusions. one between self occupied and rented one and second section 71 (subsec. 3A) & section 24(b).

I would ask you, what changes has been made (as per Finance bill, 2017) to deduction u/s. 24(b), for rented property?

Ra Tax (Se) (12 Points)
Replied 26 March 2017

Sir, please check this link.

https://economictimes.indiatimes.com/wealth/tax/budget-2017-government-rules-out-tax-incentive-beyond-rs-2-lakh-for-second-home/articleshow/56970832.cms

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 26 March 2017

I wanted to clear your doubt, if you had wished. These articles are based on combined effect of both the sections (net effect on second property), but that has confused you more!!!

Good luck.

anuj saxena (officer) (37 Points)
Replied 27 March 2017

sir for my father senior citizen fixed deposit details can be shared

anuj saxena (officer) (37 Points)
Replied 28 March 2017

I wanted to be clear that if I will avail home loan with my father and it will be foreclosed and then I will avail another home loan where I will be individual so in the both cases will I be able claim the tax rebate for both or for only one time I can claim for that

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 28 March 2017

As I clarified earlier, if you are co-owner of the house ( by making suitable agreement with your father, who is land owner), you remain co-owner of the house untill you sell or gift your rights in the property. Secondly once you availed HBL as co-owner, trasferring the loan to another bank will not be difficult. In short, owner/co-owner of house property can get homeloan, based on its repayment capacity.