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Staying on rent and let out own flat

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Ashish

None

30 Points Posted on 03 November 2016

I have two flat on my name, one in hometown which is used by parents and second in different city where I work (Pune and in same muncipal corporation).

No loan on first property and second house has running home loan of 40lacs.

Avg rent for first property is around 3000 and for second property is 25000

So I want to rent out my Pune flat because it is bigger and want to move in small flat in Pune as tenant.

Query: What should be best possible approach for TAX adjustment under sec 24?, I am not bothered on 80C because it already fully covered from other sources.

Replies (1)

Ashok Kumar

CA qualified

270 Points Posted on 03 November 2016

If you stay in your Pune house it can be taken as self occupied and treat your first house as deemed let out and annual value be accordingly computed and you can claim Interest on housing loan subject to a max limit of 200000.

But if you let out your Pune property and take another property for rent, your first house can be taken as self occupied and Pune property as let out and can claim full amount of interest.

So you have to consider Tax on deemed let out value as a relevant cash flow under option I and a) Rental income net of taxes thereon; b) rental outflow for your new house and c) tax saved on interest paid in excess of 2 lakhs under Option II, so as to decide on better option.