Second home loan - clarification required - Income Tax

Hi Friends,

I have availed housing loan on my name at SBI 10 years back to construct my first home at Nagapattinam, which my parents occupy and I am availing tax subsidy for both interest and principal. (approx. interest per year is 40k & principal is around 20k)

Recently, I have bought an apartment at Chennai, for my own purpose (since I work from Chennai with my wife and kid) and started paying EMI for the past 3 months. I have taken loan from HDFC this time and even though the construction is not completed, I am paying both the principal and interest right from beginning of the loan.

Kindly advise - Am I eligible for housing loan subsidy for both the loans? Once the construction is completed, me with my wife and kid will occupy the home.. Since both the houses are not let-out, under what classification, I can get tax benefit for both these houses?

Regards, Magesh.

Hello MR magesh,

Under the I-T Act where an assesse owns more than one residential house, then one of the house of his own choice will be considered as Self-occupied & the other one will be considered as Deemed to be let-out property.

The property at Nagapattinam can be considered as Deemed to be let out as the interest & principal is low then the property at Chennai. Hence the Rent to be considered for this property shall be the fair rent that would be receivable if it had been let out. However you wud get the benefit of the Municipal taxes paid on this property & on the net amount you would get a Std Deduction of 30% & the benefit of interest paid on the home loan.

For the house at Chennai, it can be considered as an Self occupied property & you can claim the interest paid on this property as a deduction form your Gross total Income. But as the construction is not completed you will not be eligible for claiming the interest & principal on the home loan until the construction gets completed. The interest paid upto the date of completion of the construction will be eligible for deduction in 5 equal intallments from the previous year preceeding the year in which the construction gets completed. After that you will eligble for whole of the interest paid during the PY & the principal component.