two self occupied house in differnt cities - how to deal with taxes

I work with a MNC in Kolkata. I am currently living on rent of Rs. 12,000/-.
I have to two houses purchased on loan, details of which are given below:

House A Purchased in June 2002 in Delhi Loan from IDBI (Rs. 600,000/-). Outstanding balance as on 29.02.2012, Rs. 98,000/- For Financial Year 2012 -12, interest on house loan will be around Rs. 20,000/- and principal Rs. 30,000/- Currently used by Parents for living.

I have been showing this house as “self occupied” and have been claiming deduction for interest on housing loan U/S 24 and repayment of principal U/S 80C till date. Recently I have purchase another house on loan.

House B Recently purchased a house in March 2012 in Kolkata. Loan taken from Axis Bank (Rs. 50, 00,000/-) as on 1st March 2012 For Financial Year 2012 -12, interest on house loan will be around Rs. 535,000/- and principal Rs. 75,000/- Intend to use this for self occupation

Please can you guide me how I can use the provisions of income tax Act to get maximum tax benefit under the law for FY 2012-13.

asked Mar 19 '12 at 00:44 by Kapil Benerjee 1111


In case you show both houses as self occupied (i.e. don't show rental income on any of these), then only total 1.5 lakh can be claimed for interest deduction.

It won't matter much if you show Delhi home as not-self-occupied as interest on it is anyways small. So if you show a notional rent on Delhi house, interest exemption would increase to total 1.7 lakh (1.5 for Kolkata and 20K for Delhi). But it would also add notional rental income to you taxable income.

If you show Kolkata house as rented one, principal amount deduction won't be available to that.

Keep in mind that Exemption for interest and principal would be available from the year in which possession is taken.

Also note that HRA component of salary would become fully taxable as now you own a house in city of employment.

answered Mar 21 '12 at 22:47 by Pankaj Batra 5.2k320

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Asked: Mar 19 '12 at 00:44

Seen: 1,826 times

Last updated: Mar 21 '12 at 22:47