Can the tax advantage on income from property loans be claimed for independent and rented properties?
I took out a home loan for two properties. One is occupied by myself and the second is rented out. As I understand I can claim interest benefit of 2 lakhs on each house separately. Is my understanding correct?
Your understanding that one is allowed to claim only two lakh interest during the year from freelancers and tenants is partially incorrect. There are different deduction rules with respect to interest paid on mortgages for self-occupied properties as well as those that are rented out. A person is allowed to have a maximum of two houses as a self-occupier. In the event that one occupies more than two home properties for self-occupancy, he must choose two properties as self-occupied and the other properties are treated as if they were rented. With respect to these properties deemed to have been rented, you must offer a notional rent at the market rate for taxation. With respect to all self-occupied properties treated as such, you are allowed to claim a deduction of up to Rs. Two lakhs in total every year. For rented properties, including those that are self-contained and considered to be rented, you can claim full interest on your rental income.
However, there is a cap of two lakh rupees of calculated loss under the title Income from Home Ownership for all properties taken together, whether self-contained or rented, which you can deduct from your other income during the same year. Any loss greater than two lakh rupees which cannot be offset in the current year by other income can be carried forward. This carried forward loss can be set off against taxable income from real estate for the next eight years.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter
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