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Property vacant for whole year

Gaurav (ssd) (25 Points)

06 January 2012

I have a property which was vacant for the whole year and I was staying in a rented house in a different city. My Home loan interest outgo was more than 2 lakh. Can I take Interest exemption of total more than 2 lakh or its is restricted to 1.5 lakh.

what is the calculation?

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7 Replies

Jinay (Article) (172 Points)
Replied 06 January 2012

24. Income chargeable under the head “Income from house

property” shall be computed after making the following

deductions, namely:-

(a) a sum equal to thirty per cent of the annual value;

(b) where the property has been acquired, constructed,

repaired, renewed or reconstructed with borrowed

capital, the amount of any interest payable on such

capital:

Provided that in respect of property referred to in sub-section

(2) of section 23; the amount of deduction shall not exceed

thirty thousand rupees:

Provided further that where the property referred to in the first

proviso is acquired or constructed with capital borrowed on or

after the 1st day of April, 1999 and such acquisition or

construction is completed within three years from the end of

the financial year in which capital was borrowed, `the amount`

of deduction under this clause shall not exceed one lakh fifty

thousand rupees

Assuming the term of your home loan falls within the above ambit, you shall deduct Rs. 1,50,000/- and since there is no other income accruing on the same and you can assume it as you self occupied property and show a loss of Rs. 1,50,000/-

Regards,

Jinay Savla

Gaurav (ssd) (25 Points)
Replied 06 January 2012

But i Have heard that you can take notional rent i.e. rent of a similar property in the area and substract from the interest paid?

Do this notional rent is not applicable if property is vacant for whole year?

Tanash Chakraborty (KPMG) (292 Points)
Replied 06 January 2012

mr gaurav,

if u have a property in a city which you own but you stay in another city you may treat the property in the other city as a Self occupied property. Its only that you camnnot get a 80GG deduction for the rent that you paid in your house that you stay in.the condition of not having another house in another city to be treated as self occupied if for that purpose...

else you can very well go ahead and assess the house to be self occupied but u can claim a decution towards interest on borrowed capital u/s 24(b) only upto a maximum of Rs.1,50,000. hence you will have a negative income from house property of Rs. 1500000.

however as a matter of tax planning....if you want to claim a higher deduction of the full amount of interest on borrowed capital then you are advised to give the house on rent(let out) atleast for a day.

as per the income tax act,if a house property is let out even for a single day in the previous year it can be treated as a let out property and you can claim the total amount of interest(200000 as in your case).but you will have to carefully fix the rent of the house and may take furthur advice regarding how much the rent can be fixed based on the area the property is situated.

hope this inforation would help.

Jinay (Article) (172 Points)
Replied 06 January 2012

Prem,

80 GG will be applicable to his case if he doesn't claim HRA in the first place. So assuming he is working in a different city and a rented place, he will take the benefit of HRA as well as 24(B).

So 80 GG won't work for him, the only way possible for him at the moment is to go with section 24(B).

Gaurav,

Notional rent will come into picture when you have 2 house properties and niether of them are given on rent. I assume thats not the case.

Regards,

Jinay Savla

Tanash Chakraborty (KPMG) (292 Points)
Replied 07 January 2012

jinay,

yes i do know the criteria of him not being able to claim 80GG if he recieves HRA.i said exactly the same..that he would have a problem in claiming HRA if the case would be such as meentioned above but it is not in his case...hence as i said claiming 24(b) is the one he can claim...and furthur if he can plan out the letting out of the vacant house well with vacancy factor into consideration then he can claim all of the 200000 that he pays as interest on loan towards the house.

Z ( ) (2960 Points)
Replied 07 January 2012

If possible then try to give the property on rent as suggested by members

Need confirmation on this part

you need to prove that you took reasonable steps (like putting to-let / vaccancy sing) to let out the property and even then you were not able to rent it out .

As wordings of sec 23(1)(c) says where the property or any part of the property is let and was vacant during the WHOLE or any part of the P/Y

If we can cover it under sec 23(1)(c) then it will be treated as rented property and there will be no limit

meabhijit (Project Manager) (172 Points)
Replied 15 January 2012

Gaurav,

To claim the total interest deduction for loss from property, put the house on rent for atleast a month. The property will be considered as let-out and hence total interest deduction will be applicable. Use the loss due to vacany in your calc.

As for rent, take the fair rent in the area for similar property. In that case, this will be treated as actual rent and calc can be based on that.