Income tax liability for 2 homes, one under construction

POSTED BY Santosh Mahajan ON May 9, 2013 6:39 pm COMMENTS (21)

Hi,

I have 2 homes, one in Pune and another in pimpri chinchawad.

one of them is under construction property from last 2 years.

I stay in rented house because of my office location.

Can you please help me, how can I maximize the tax rebate?

 

Thanks and best regards,

Santosh.

21 replies on this article “Income tax liability for 2 homes, one under construction”

  1. ashalanshu says:

    Dear Santosh, in your case the least of the 3 ‘ll be your tax free HRA.

    1. 40% of your yly basic = 908000*40/100 = 363200
    2. Rent paid in excess of 10% of your basic = 240000 (your actual rent) – 10% of basic = 240000 – 90800 = 149200
    3. Actual HRA received = ??? (you forget to quote your HRA)

    So out of the above 3, which ever is the least amount, ‘ll be your tax free HRA amount. anything in excess in your HRA ‘ll be taxable.

    Thanks

    Ashal

  2. Santosh Mahajan says:

    Dear Ashal,

    Thank you so much for quick response.

    My annual basic salary is 908K and my wife’s basic salary is 450K.

    Thanks and best regards,
    Santosh.

  3. ashalanshu says:

    Dear Santosh, Principal part is to be counted for section 80C benefit within the limit of 1L Rs. So that’s upto you to check for the same along with your PF, PPF, life insurance prem. etc.

    In case of 1st home –
    Gross yly rent =8000*12 =96000
    30% of above = 28800
    home loan interest = 145000
    Net income from 1st house property = 96000 – (28800+145000) = – 77800 Rs.

    2nd Home –
    Gross yly rent =8000*12 =96000
    30% of above = 28800
    home loan interest from current FY= 255000
    Carry over interest @ 20% from prev. year = 20% of 500000 = 100000
    Combined interest = 355000
    Net income from 2nd house property = 96000 – (28800+355000) = – 287800 Rs.

    Hence combined Income from 2 house property = – (77800 + 287800) = – 365600

    This 365600 Rs. ‘ll be available for set off from your salary income.

    Regarding calculation of HRA benefit, I need your basic salary.

    Thanks

    Ashal

  4. Santosh Mahajan says:

    Dear Ashal,

    We got the possession of the flat and rented the second house as well.
    To summarize, 2 own houses,

    My old home which is being occupied by tenants,
    Interest component: 145K
    principal component: 45K(including prepayment)
    rent per month: 8K

    The other home, we recently got possession of
    Interest: 255K
    Principal: 36K
    Rent I get: 8K per month.
    For last 3 years I paid almost like 5Lac in interest for this home loan. We got possession in June 2013.

    Another twist is, I joined a company in Bangalore and paying 20K rent.

    How can I maximize tax rebates for me and my wife. My wife comes in lower income tax bracket than me. and she is joint home loan holder for our first home.

    Thanks and best regards,
    Santosh.

  5. Santosh Mahajan says:

    Thanks buddy!

  6. Dear Santosh, As you are claiming full tax benefit from the 1st house property & she is claiming full rent benefit for your own residence, please keep it this way. The split of rent between both of you ‘ll not be tax friendly. Once 2nd property is complete, both of you should declare it’s rent & claim maximum interest split between both of you.

    Thanks

    Ashal

  7. Santosh Mahajan says:

    Hi Ashal,

    She is joint holder for the home loan but she has not put in any money for initial own contribution. My employer gave me a form to declare that I am paying 100% for the home loan.

    The rent agreement is made with both of our names on it.

    She claims rent in full and I claim home loan interest and principal.

    Thanks and best regards,
    Santosh Mahajan.

  8. Dear Santosh, for the first property, was any amount put in by your wife? if yes, how can you claim full benefit from it for taxation purpose? In whose name the rent agreement for your own residence is made?

    Thanks

    Ashal

  9. Santosh Mahajan says:

    Dear Ashal,

    We have 2 homes owned by us. The old home have joint home loan with my spouse.
    But I claim the 100% interest and principal in my income tax returns. The new home is under construction property from last years. and we have not claimed anything against its interest/principal yet.

    We stay in rented home, we pay 12K as monthly rental and my wife claims it in full.
    We both are salaried and we both get HRA. But I claim the home loan part and she claims HRA.

    My old home which is being occupied by tenants,
    Interest component: 145K
    principal component: 45K(including prepayment)
    Rent per month we fetch: 8K
    The other home which is under construction, I started EMI for it
    Interest: 255K
    Principal: 36K
    Rent I pay: 12K per month.

    I am in the higher income tax slab compared to her.

    Thanks and best regards,
    Santosh.

  10. Dear Santosh, Wife is claiming it? Can you clarify a bit the whole thing?

    Thanks

    Ashal

  11. Santosh Mahajan says:

    Dear Ashal,

    I do not claim it, but my wife does.

    Thanks and best regards,
    Santosh.

  12. Dear Santosh, are already claiming HRA tax benefit or not?

    Please clarify.

    Thanks

    Ashal

  13. Santosh Mahajan says:

    Yes Ashal!

  14. Dear Santosh, are you getting any HRA as part of your salary?

    Thanks

    Ashal

  15. Santosh Mahajan says:

    Hi Ashal,

    Possible rental income on new home would be roughly 84K per year.
    and I paid 385K as interest in last 2 years for my new home.

    @Karan, I would include rental income after reducing the municipal taxes and 30% standard deductions. I will also be able to claim tax benefit for the rent I pay, right?

    Thanks and best regards,
    Santosh.

  16. Dear Santosh, I’m not discussing here HRA benefits as same is already available to you from your employer. To calculate your tax benefit, I need the possible rental income from the new house & the interest paid by you in past 2 years till 31st march 2013.

    Thanks

    Ashal

  17. I would here like to clarify that I earlier thought that your 1st house is lying vacant in Pune…

    As the 1st property has been given by you on Rent, Income Tax would be liable to be paid on the same

    However, from the Rent received you can claim deduction for Municipal Taxes paid & Standard Deduction @ 30%

  18. Santosh Mahajan says:

    Thanks Ashal and Karan!

    I will be getting the possession in June 2013.

    Thanks and best regards,
    Santosh.

  19. Dear Santosh, a small addition to what dear Karan had already told you, till the possession of your 2nd house is not with you, you can not claim interest benefit on it. Yes Principal repayment benefit within the overall limit of 1L Rs. for section 80C is there for you.

    Now do tell me when are you supposed to get the possession of 2nd house?

    Please clarify.

    Thanks

    Ashal

  20. Santosh Mahajan says:

    To summarize,

    My old home which is being occupied by tenants,
    Interest component: 145K
    principal component: 45K(including prepayment)
    rent per month: 8K

    The other home which is under construction, I started EMI for it
    Interest: 255K
    Principal: 36K

    Rent I pay: 12K per month.

    So what would be my tax liability this year considering 10L as my annual income after 1L 80C deductions.

    Thanks and best regards,
    Santosh.

  21. As you are staying in a rented accommodation because of your employment, your 1st house would be exempted from levy of income tax if it is self-occupied..

    As far as your 2nd house is concerned, as it is under-construction, it would also be exempted till the time it is not completed… But once it gets completed tax would start getting levied assuming that it has been let out…

    The above answer is to the best of my knowledge… Waiting for more experts to share their views…

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