Staying on rent and let out own flat

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.