I work with a MNC in Kolkata. I am currently living on rent of Rs. 12,000/-.  My current salary is around Rs. 20, 00,000/- per year.

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 1^st 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.

 

If a person has 2 houses, he can choose to indicate one house as self occupied and the other as 'deemed let-out'. Since  you are paying higher interest on second house, it is wise to show the house as deemed let-out and claim full interest deduction under section 24b, principal deduction (upto INR 1 lakh) under section 80C and the usual standard deductionof 30% on NAV.

Hello Priya,

Thank you for your response. I think i should treat house A as self occupied because the limit of interest deduction on housing loan on 'self occupied property' is capped to 150,000/-.

And if i treat house B as self occupied, I will be getting deduction of only 150,000/- whereas the interest outflow is around Rs. 535,000/-

Please confirm that this is correct understanding.

Also, House A is situated in Delhi and house B in Kolkata (where I am employed). Will it create any problem under the income tax Act to treat house A as self occupied since it is not actually situted at the place of employement?

thank you once again.

Yes that is correct.