House property income calculation - houses in 2 cities

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 January 2019 I stay and work in a company in Bengaluru. I have been showing my house in Mumbai as self occupied and claiming bank loan interest deduction for several years. I recently (in October 2018) registered a house in Bengaluru in joint names (me and my wife); home interiors going on now. Possession letter from builder is still pending. Home loan EMIs have started from Oct 2018.

2 questions please:
1. Given my parents stay in Mumbai house, do I have to show Bengaluru house as self occupied and Mumbai's as deemed let out?

2. In either case, what will be the home loan interest treatment for my Bengaluru house?

Dipika Shah

Dipika Shah (Expert)
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19 January 2019 It is at option of assessee under the Act to choose one of the property as deemed to be let out and other as self occupied.

Since you will be staying at house in Bangalore it is advised to consider that house as self - occupied and mumbai house as deemed let out. In that case the interest on housing loan for bangalore property which will be self occupied will be available to Rs.2 lakh. The interest on housing loan from Mumbai property after reducing the rental income will be loss from house property from second property.

There is amendment in section 71A which impacts the set off of loss from house property with that of other income which restricts to the extent of Rs.2 lakhs considering the loss from both the properties. For instance, if an individual has a second house and is earning a rental income of Rs1 lakh per annum and Rs5 lakh is the interest outgo on the housing loan so the set off loss on the housing property comes to Rs4 lakh. The loss on self occupied property will be to the extent of Rs. 2 lakhs, total loss is Rs.6 lakhs under the head IHP.

As per the amended section 71 out of total loss of Rs.6 lakhs, 2 lakhs will be adjusted against any other income remaining Rs. 4 lakhs will be carried forward for set off in next year.

Amended section 71(3A) reproduced below
(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head "Income from house property" is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.]

Querist : Anonymous

Querist : Anonymous (Querist)

20 January 2019 Thank you so much for the detailed response.
Some follow up questions below please:
a. Bengaluru house is jointly registered (me and my wife). Could my wife (Homemaker and no IT Returns filed for her) file her Return showing the Bengaluru house as self occupied in her Return and I continue to show Mumbai house as self occupied in my Return?

b. If we do option 'a', would both me and my wife get loan interest deduction of 2 lakhs each? Is there any benefit in doing this as she is not having any taxable income?

c. Whether me or my wife declare 'self occupied' versus 'deemed let out' this year, can we change it next year?

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Dipika Shah

Dipika Shah (Expert)
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23 January 2019 Bengaluru house though jointly registered the person who pays the interest cost on housing loan can alone claim in his return or if interest cost is paid in proportion by both you and your wife then both of you can claim deduction in proportion to the payment made in your respective returns. Individually you can claim loss upto Rs.2lakh.

If she do not have any other income to set off this loss then the loss from house property can be carried forward upto 8 years.

You can change your option next year.

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2019 Thank you so much; it's very useful and clear to me.