Interest paid on second home & income tax

Tax planning 2152 views 4 replies

SSK__

Service

24 Points Joined April 2012

Hello!

I already have one house at Nerul (dist. Thane), only in “my name”. Bought >7years back. I am planning to foreclose the loan outstanding on this home, in this FY.

I have recently bought another “under-construction” house at Kharghar (dist. Raigad), in joint name, also a joint loan (Me & my wife). Possession in next 1.5 years.

My query:

Can I get the tax benefit for the interest paid for this second home? How & what are the rules applicable?
Can my wife claim tax benefit for the interest paid for this second home?

Please suggest what are the rule applicable & how should we proceed in our tax planning?

Thanks!

Replies (4)

Prateek Agarwal

Sr. Executive - Finance & Accounts

1732 Points Joined February 2011

Hello Sir,

In House Property, if there are more than one Self Occupied House Property, then you have to treat One House as Self Occupied and all the others as Let Out.

You have to compute Income from both houses separately and then aggregate of both the houses will be taken as Income from House Property.

Do the above for yourself and as for your spouse, take it as Self Occupied Property. Whichever is beneficial from tax angle, consider the same.

Regards

Prateek

yuvak

Practising CA

144 Points Joined January 2010

Hi,

Firstly, note that your 2nd house is currently an 'under construction' property and therefore not considered as 'House Property Income' for tax purpose. Therefore, any interest in this house till such date of effective use of the 2nd house will be capitalised and amortised over next 5 years for tax purpose.

Since the 2nd house is jointly owned and financed (incl home loan), the interest deduction can be claimed by you and your wife separately.

Cheers

Mihir Doshi

B.Com CA CS LLB

2187 Points Joined July 2008

Agree with Mr. Yuvak (Expert) Once you close your first loan, you can start claiming the deduction on second loan but in your case, your house is Under construction, so need to worry for this Financial Year. Thanks Mihir Doshi