Can a self-occupied house be "deemed let-out" for interest deduction?

Tax queries 467 views 2 replies

Cha Ran

23 Points Posted on 18 December 2020

A has 4 houses - 3 in Coimbatore and 1 in Bangalore. Out of the 3 houses in Coimbatore, one is occupied by A's parents and other two are let out. A lives in Bangalore. A has claimed the house that parents live in as "Self-occupied". A has taken loan for purchasing the house in Bangalore. If the house in Bangalore is claimed as "Deemed let-out" the interest paid on the housing loan exceeds the notional rent value. This allows A to offset the taxes on the rents received from other house properties, thus reducing the overall tax liability.

Now, as per the latest rules, two houses can be claimed as "Self occupied", but is it required that the houses be claimed as "Self occupied"? Can A claim the house in Bangalore as "Deemed let-out" instead of self-occupied?

Replies (2)

sudip sharma

article

734 Points Posted on 27 December 2020

Any of two house of your choice

Cha Ran

23 Points Posted on 27 December 2020

Thanks for the reply. Question is, it mandatory to declare two houses as self-occupied? Can only one house be declared as self-occupied and other declared as deemed let-out?

The house in Bangalore has an associated home loan. Interest payment towards that home loan is more than 500,000. Rental income received from both the houses rented out is 130,000.

Going by ITR2 Java application, if the Bangalore house is deemed let-out, the interest payment allows offset of the rental incomes received from other houses. Hence the "Loss on House Property" is the full allowed 200,000.

If the house is set to self-occupied, then the interest is offset only to 200,000. With the addition of rental income from other houses, the net "Loss on House Property" is only 70,000.

So can the house with the home loan be deemed as let-out?