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

Aashok Kumar Sharma (Expert)
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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.

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