Deduction in tax payment in case of house loan and the property is let out.

POSTED BY ram ON March 12, 2012 11:52 am COMMENTS (2)

I had taken a house loan of 40 Lakhs and for which I am paying 4 Lakhs bank interest per year. The property is let out to my brother who is paying me rent of suppose 5000 per month.
Let Us suppose the actual I am paying to the bank is 4 Lakhs. and Along with this i am paying a interest of 4 LPA. (In total paying 8 Lakhs to bank).
If the property is a let out property then the whole interest that i am giving to the bank i can claim the rebate on this interest. Since i will declare the gain of this property as = 60,000 – 4,00,000 = – 3,40,000 (-ve).
So I can save tax on this whole amount of “-3,40,000 (-ve)” or not ?

2 replies on this article “Deduction in tax payment in case of house loan and the property is let out.”

  1. ram says:

    Dear Ashal ,

    Thank you very much for providing such a precise and to the point solution. You had solved my query.

    Once again thank you very much.


  2. Dear Ram, Yes your understanding is correct but calculation is wrong. Here is the correct calculation.

    A. yly rental income received = 60000
    B. property tax paid to local civic authorities = 2000 (please put your own no. if you have paid any tax, I’m using it for example purpose)
    C. Net rental income = A – B = 58000
    D. Standard deduction from the rental income = 30% of C = 17400
    E. Interest paid on home loan for the rented property = 400000
    F. Net Taxable Income from the property = C – (D + E) = -359400

    The F above is your loss from house property to be adjusted from your other income say salary etc.



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