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Tax exemption on 2 house properties

bharat (MBA) (30 Points)

03 April 2014

I need information how I can get tax exemption if I have 2 house properties in 2 different cities ( Delhi and Bangalore).

I am staying in rented house in bangalore since it is far from office so i had given both Delhi and Bangalore properties on Rent.

For both properties i had taken housing loan from bank. Right now i am claiming HRA since i am staying in rented house and Interest for Delhi property ( Rs 150, 000).

Since i had taken one more property in bangalore and i am paying total interest Rs 100000 per year, can i claim exemption for that too apart from IT exemption on Delhi proprty.

Bharat

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3 Replies

CMA Sanjay Hakhu (GM-Finance & Accounts) (65 Points)
Replied 03 April 2014

One Self Occupied House property is exempted from tax under the Head “Income from House Property”. All other house properties are deemed to be let-out and thus taxable even if those are not actually rented out. Thus, an assessee can opt any one house property at his choice as “Self-Occupied” and take the benefit of exemption.

If an assessee resides at a place (another city) away from his residence due to employment, that property is deemed to be “Self-Occupied” and hence exempted. Thus in effect you can opt the property at Bangalore Self-Occupied and claim exemption.

Also note that the Interest on Capital Borrowed for self-occupied/deemed to be self-occupied property is limited to Rs.150000 p.a (subject of course to actual payment of interest) i.e., actual interest paid or Rs 150000 whichever is lower.

Also note that the interest paid/payable on other let-out/deemed to be let-out properties can be claimed without limit (subject of course to actual payment). i.e., you can claim all the interest paid/payable against let-out/deemed to be let-out property i.e, even more than 150000. But you have to show income from such property also.

Thus, in effect you can claim exemption against only one house property of your choice.

Also, you can claim principal re-payment u/s 80C. You can also claim HRA against rent paid for Bangalore rented house (if actually paid).

bharat (MBA) (30 Points)
Replied 04 April 2014

Thanks Sanjay for quick response

Regards

Bharat

Sathya Sankeerth K N (Chartered Accountant) (429 Points)
Replied 04 April 2014

Also note that you may have to compare considering the munical rent, standard rent and fair rental value while computing your income from house property. Do an analysis before you chose any of the houses as Self occupied.

In your case Delhi house can be treated as Self occupied as well Bangalore house is also your self occupied property. You also have a rented house. Thus in total you have 3 houses. So do an analysis before you chose a self occupied house.