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)

Hi,
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 ?
Thanks,
Ram

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

  1. ram says:
    March 13, 2012 at 9:43 am

    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.

    Regards,
    Ram

    Reply
  2. ashal jauhari says:
    March 13, 2012 at 12:21 am

    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.

    Thanks

    Ashal

    Reply

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