Income Tax: Deduction of loss on second home from net income

Hi Aniket,

HUF and individuals  can also claim upto Rs 1 lac u/s 80 C for repayment of Principal portion of home loan.

For Interest Portion , if the HP is self occupied , then interest allowed is upto Max Rs 1.5 lacs.Only one property can be claimed as SO.Remember cap borrowed has to be befre the 1-4-1999 and 3 yrs constuction time factor.

If another HP exits, then it shall be let out or deemed to be let out- Annual value as per section 23(1) (a).The HP which has higher Annual value shuld be opted as Self Occupied.

For deemed let out HP , there is no limit for interest claim.Plus 30% of net annual value as statutory deduction can also be made for all non self occupied HP.Not for SO HP.

Originally posted by : RAMKRISHNA MENON
	If another HP exits, then it shall be let out or deemed to be let out- Annual value as per section 23(1) (a).The HP which has higher Annual value shuld be opted as Self Occupied. For deemed let out HP , there is no limit for interest claim.Plus 30% of net annual value as statutory deduction can also be made for all non self occupied HP.Not for SO HP.

 Thanks for the response.

Section (23)(1)(a). In the case of Let Out Property [Whether for residential purpose or for business purpose]

The annual value of any property shall be deemed to be

i.            The sum for which property might reasonably be expected to let from year to year or
ii.            When property or any part of property is let, the annual rent received/receivable less unrealised rent or the sum as above, whichever is higher.
iii.            Where property or part of it is let and was vacant for whole or part of year, and rent received/receivable less unrealised rent is less than the sum as per (i) above due to the vacancy, then the rent actually received/receivable.

Couple of questions in this regard (point 3)

1. If the property is vacant for the whole year, the rent actually received is 0. So in that case can the deductions be made on rent amount of 0?
 

2. Also you mentioned that property that has higher annual value should be taken as self-occupied. Is that a guideline or is it mandatory to do it so for the purpose of tax calculation?

its not mandatory but it will be beneficial for the assessee to take the higher value house as SOP

Dear Aniket,

     In the case of HP, the assesse has the option to choose one of his property as self-occupied. So, practically, the property with a higher value will be chosen by the assesse as self-occupied. However, a wise person will analyse both the value and interest payable, and then take a decision. Eg. GAV of HP1 is Rs.20000 and Interest payable is Rs.2000. GAV of HP 2 is Rs,100000 and interest payable is 2,20,000. In this case, normally the person wud take HP 2 as self-occupied, COZ, the GAV is high. However, if HP1 is treated as let out, the total loss from HP wud be Rs.1,38,000/- If HP 2 is treated as let out, the total loss from HP wud be Rs.1,52,000.

In case of two house, one house can be claimed as self occupied and in case of second house it shall consider as deemed let out.

In case of self occupied house assessee can claim maximum Rs 150000 deduction on account of payment of interest (subject to condition).

In case of deemed let out house, the annual letting value shall be consider as gross annual value. From which deduction on account of payment of munciple tax and deduction u\s 24 (standard deduction 30% and payment of interest) can be claimed. There is no limit for claiming of interest payment deduction.

Thanks all for the comments and inputs.

Any idea how the 'let out' property is treated in new direct tax code? Will the same/similar deductions be available for let out property under new DTC?