### Loan and Tax implication

POSTED BY ON September 17, 2012 8:35 pm ONE COMMENT

I am planning to buy a home in partnership with my friend in Bangalore. So both of us would be co-owners in the ratio 50:50
We would be the co-borrowers of the loan as well in the same ratio.

a.) From what I read, both of us would be able to claim tax benefits – maximum of 1 lakh on principal and 1.5 lakhs on the interest component. Is this correct?
b.) We are planning to rent out the new property. Since I stay in a rented house in bangalore, can I continue to claim HRA?
c.) Will the rent obtained automatically go into the taxable income category or any deductions can be shown due to the housing loan re-payment?

1. Dear Ajay, thanks for writing in. Here are answers of your queries.

1. Yes Principal benefit as well as interest benefit ‘ll be available to both of you in the same 50:50 ratio.

2. As you want to rent out the property, the rental income ‘ll be added to income of both of you in the same 50:50 ratio but interestingly in this case, the full interest ‘ll be available for both of you (no 1.5L Rs. individual limit). As you are declaring rental income, you may claim HRA benefit as usual.

3. The property tax if any paid to municipal authorities ‘ll be debited from the rent received & then 30% ‘ll be deducted as standard deduction for the upkeep & maintenance of the house, no matter you are actually spending that much amount or not. Here is an example calculation. I assume 2L Rs. is the rental income from the property & loan interest is 6L Rs. So effectively your share for rental income & interest is 1L & 3L respectively. Now here goes the calculation.

A. Gross rental income = 100000
B. Property Tax paid = put your own no. if any, for example purpose, I’m putting this figure as zero.
C. Net rental income = A – B = 100000
D. Standard deduction @ 30% of C = 30000
E. Interest paid on home loan = 300000
F. Income from house property = C – (D+E) = -230000

So in your case apart from HRA benefit you ‘ll also get the benefit of -230000 Rs. loss from house property to be adjusted against your salary income.

Thanks

Ashal

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