Housing Loan and Rental income

POSTED BY Ashish Garg ON May 2, 2013 11:55 am COMMENTS (3)

Hi,

I need some clarification through this forum on housing loan interest benefit and rental income.

Myself and my wife jointly booked an apartment and will be ready in Sep 2014. As of now we are staying on rent and are paying the rent jointly (both claiming HRA benefit on 50% of the rent).

Till Sep 2014, we shall be paying the pre-EMIs and after that full EMI. Now if we put the apartment on rent in Oct 2014 (say) and continue to stay on rent (adding rent generated to our income), will both of us continue to avail the HRA benefit and also the principal loan payment (upto 1 lakh for each) + full interest benefit? or only principal (upto 1 lakh for each) and interest upto 1.5L each would be available.

Basically idea here is make use of heavy interest payable on home loan.

P.S.: full EMI would be about Rs.85,000 per month (so interest component would be very high initially) and this house can generate rent of about 30K per month.

Ashish

3 replies on this article “Housing Loan and Rental income”

  1. Ashal Jauhari says:
    May 2, 2013 at 3:16 pm

    Dear Ashish, for detailed calculations, please write a personal mail to me if you want to. Otherwise, your basic understanding regarding the tax benefit & actual earning/saving is correct.

    Thanks

    Ashal

    Reply
  2. Ashish says:
    May 2, 2013 at 2:31 pm

    Dear Ashal,

    Thank you for your response.

    This really good to hear. I am presently paying a rent of 22K, which may go upto 25K by 2014. So if I get a rent of 25-30K for my own apartment, effectively its no profit-no loss to me as far as money is concerned.

    But If I get HRA benefit and also the full interest (which would go up to 7L in first year + the 20% of pre-EMI interest), I can reduce my tax liability a lot. So HRA benefit of about 75K for each of us + 3.5L of interest for each of us and additional income (thru rent) of Rs.1.8L (taxable) for each of us (assuming I get 30K per month). Net result, saving of 2.45L from taxable income as against 1.5L.

    If I myself move to this apartment, I will not be able to claim HRA benefit and also loose out on the full interest and will be limited only upto 1.5L for each of us. Am I correct?

    Sounds good to me.

    Thanks again.

    Ashish

    Reply
  3. Ashal Jauhari says:
    May 2, 2013 at 12:57 pm

    Dear Ashish, if you are declaring rental income from the new house & at the same actualy paying rent for your own residence, you can claim both HRA + home loan benefits. Here YOU means (Ashish + Ashish’s wife). As the house ‘ll comeinto your possession in Sept 2014, all the interest paid by you till March 2014, is interest in previous FY. So 20% of this is available for you in Fy 2014-2015 (the Fy of possession of your house).

    so declaring rental income & claiming full interest benefit is the way ahead for you. if still you are doubt, please ask here again.

    thanks

    Ashal

    Reply

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