IT benefits on Home Loan with multiple properties


I would like to know what income tax benefits I can claim in the following scenario:

a. I have a vacant plot in my name

b. I have another plot on which I have recently constructed a new house - initially composite loan was taken for purchasing the plot and was later topped up for house construction. So currently the total oustanding amount is 50 Lacs

c. I stay in a rented house, for which I am claiming HRA benefit. Since my new house is far from my workplace I plan to rent it out and continue staying in the same rented place.

My questions are:

  1. Can I continue claiming HRA benefits since I am paying rent?

  2. For my new home can I claim relief for the interest paid on the loan after declaring the rent received as income? Is there a ceiling for this relief (Since this is my second property) ?

  3. Am I eligible to claim relief only for the house part of the loan, or for the full loan amount (i.e plot and house) ?

Thanks in Anticipation!

asked Apr 02 '14 at 15:16 by VeeJay 135

  1. Yes, you can continue with HRA exemption as you are staying on rent for work.
  2. There is no maximum limit of interest deduction on your not self occupied house. All you have to do is show rental income as income from house property.
  3. You are eligible to claim relief for full loan (plot and house), as both are taken for constructing house.

answered Apr 03 '14 at 10:33 by Pankaj Batra 5.2k320

Thanks Pankaj, for point #2 in your answer - will the interest deduction be capped to amount of rent received from that house? Note: I am gainfully employed and hence have taxable income upto 10 Lacs per annum.
(Apr 03 '14 at 12:20) VeeJay
No, interest won't be capped. Say, e.g. your rental income is 2 Lakhs and interest paid is 3 lakhs. Then net income from house property would be -1.6 lakhs (after 30% standard deduction deducted from rental income)
(Apr 03 '14 at 15:55) Pankaj Batra
Ok, so does this mean that 1.6L can be reduced from my taxable income of 10L from employment (plus any other incomes)? Thanks in advance!
(Apr 04 '14 at 12:25) VeeJay
Yes, this 1.6L would be reduced from taxable income as loss from house property.
(Apr 04 '14 at 13:19) Pankaj Batra
Thanks Pankaj. Now when I approached the bank for a top-up loan for building house, they said they cannot top-up the existing loan but can give a fresh housing loan for building the house. So now, can I add up the interest part of both the loans (existing site loan and the new housing loan) and show that as loss from house property?
(Apr 11 '14 at 14:35) VeeJay
Yes, you can add interest from both loans and claim deduction.
(Apr 11 '14 at 23:37) Pankaj Batra
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Asked: Apr 02 '14 at 15:16

Seen: 2,751 times

Last updated: Apr 11 '14 at 23:37