House property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 August 2012 sir, i have query. i have one property which is owned by me . by mortaring above property, i want to purchase other property . moreover i want to give d same on rent .and even the new property purchased is on mortgage for the remaining amount. i want to claim interest deduction for both the property. how to do that?

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2012 plzz reply!

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

28 July 2024 To address your query on claiming interest deductions for two properties, here's a detailed guide:

### **1. **Understanding the Situation:**
1. **Property 1:**
- Owned by you and mortgaged to finance the purchase of Property 2.
- You want to give Property 1 on rent.

2. **Property 2:**
- Purchased using the mortgage from Property 1.
- Property 2 is also mortgaged for the remaining amount.
- You intend to give Property 2 on rent as well.

### **2. Claiming Interest Deductions:**

#### **Interest Deduction on Property 1 (Existing Property):**
1. **Rental Income:** Since Property 1 is given on rent, the interest on the mortgage for this property is claimed under "Income from House Property."

2. **Interest Deduction:**
- **Section 24(b):** You can claim a maximum deduction of ₹2L per year on the interest paid on a home loan for a rented property. If the property is rented out, the full amount of interest can be claimed as a deduction under this section.
- **Municipal Taxes:** Any municipal taxes paid for Property 1 should be deducted from the rental income before claiming the interest deduction.

#### **Interest Deduction on Property 2 (New Property):**
1. **Loan for Purchase:** Interest on the loan taken to purchase Property 2 is also deductible.

2. **Interest Deduction:**
- **Section 24(b):** Similar to Property 1, you can claim up to ₹2L per year on the interest paid on the home loan for Property 2. This is applicable if the property is used for rental or for self-occupation.

3. **Construction or Acquisition:** If Property 2 is under construction, the interest on the loan can be claimed in five equal installments starting from the year in which the construction is completed and possession is obtained.

### **3. **Procedure for Claiming Deductions:**

1. **Declare Rental Income:**
- For both properties, declare the rental income in the "Income from House Property" section of the ITR.

2. **Deduct Municipal Taxes:**
- Deduct any municipal taxes paid on the properties from the rental income.

3. **Claim Interest Deductions:**
- Enter the interest paid on the home loans for both Property 1 and Property 2 in the "Income from House Property" section.
- Ensure that the total interest claimed does not exceed ₹2L per property per year.

4. **Adjustments for Self-Occupied Property:**
- If any property is self-occupied, the maximum interest deduction is ₹2L. For let-out properties, the entire interest amount can be claimed.

5. **Documentation:**
- Keep documentation for the interest payments and mortgage details for both properties.
- Maintain records of rental income and municipal taxes.

### **4. **Filing the ITR:**

1. **Form:** Use **ITR-2** to file your income tax return if you have rental income and interest deductions for home loans.

2. **Income from House Property:**
- Report the rental income and municipal taxes for each property.
- Claim the interest deduction under the relevant sections.

3. **Tax Computation:**
- Add the rental income from both properties to your total income.
- Deduct the interest on home loans and any municipal taxes from the rental income.

### **5. **Example Calculation:**

Let's say:
- **Property 1:** Rental income = ₹1L, Municipal taxes = ₹10K, Interest = ₹2.50L.
- **Property 2:** Rental income = ₹1.20L, Municipal taxes = ₹12K, Interest = ₹2.50L

**For Property 1:**
- Net Rental Income = ₹1L - ₹10K (Municipal Taxes) = ₹90K
- Interest Deduction = ₹2.50L (full amount deductible as it exceeds rental income).

**For Property 2:**
- Net Rental Income = ₹1.20L - ₹12K (Municipal Taxes) = ₹1.08L
- Interest Deduction = ₹2.50L (full amount deductible as it exceeds rental income).

### **6. **Additional Considerations:**

- Ensure that the interest deductions are supported by appropriate documentation.
- Review the latest tax provisions or consult with a tax advisor to confirm compliance with current rules and limits.

By following these guidelines, you can correctly claim interest deductions for both properties and comply with tax regulations.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

John Ravindran Moses

ABHISHEK AGRAWAL

Prashant Kotecha

Sanjay Ratnani

Vinod Patil

Subscribe Now

House property

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA