Tax on second property

Hello Sunil,

Section 24 of the Income Tax Act, 1961 deals with Deductions from Income from House Property. Clause (b) of Section 24 states that where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of ANY interest payable on such capital shalll be allowed as a deduction from Income chargeable under the head Income from House Property. The Explanation to Clause (b) of Section 24 goes on to state that where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, shall be deducted under this clause in equal instalments for the said previous year & for each of the four immediately succeeding previous years. It is therefore apparent that only that interest which is payable for the period prior to the previous year in which property has been acquired or constructed is required to be claimed in five equal instalments beginning with the previous year in which the acquisition was made.

In your case, the interest is for the period April 2012 onwards and hence falls within the previous year in which the acquisition is made i.e FY 2012-13 since possession occurs in February 2013. If the date of posession is pushed into the next financial year, then the Explanation to Clause (b) of Section 24 will be triggered. So as things stand, and based on the assumptions made by you, you are entitled to claim the whole of interest in FY 2012-13 (AY 2013-14) itself.

Of course, you are entitled to as much interest as is payable by you since your property will be let out. In the event it is not let out, then the interest deduction will be limited to Rs. 1,50,000/-

I hope my answer is found useful.

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Thanks a Lot, Very good Explanation to laymen like me.

You are welcome Sunil!