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Useful articles for your finance management by our team of experts

Do you have more than 1 House? How to Save Income Tax on them?

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income taxHaving multiple houses is not very uncommon these days. If you are planning to rejoice the rental income from these properties, hold on. Something is ready to pinch you hard. It is called Income Tax. We often focus on paying tax on our salary, deductions under section 80C, etc and thereby simply neglect the house property income.

You might have skipped the part ‘House property income’ while filing your taxes last year under the impression that such income may not be traced. However, IT dept is acting fast against such practices. Instead of not stating the house property income, why not think of minimizing the tax burden on this it? Before knowing how to do it, it’s important to know how self occupied properties and rented properties are treated for the purpose of income tax.

Self Occupied property for Income tax

A self occupied property would be the one which is used for your occupation. The tax benefits/deductions allowed for this are:

1)      Annual value will be treated as Nil.

2)      Principal part of home loan (up to Rs. 1 lakh under section 80C) and interest part (up to Rs. 1.5 lakh under section 24)

Rented property for Income tax

A rented property is the one which derives rental income for you. The tax benefits/deductions for such properties are:

1)      Municipal taxes paid

2)      30% standard deduction

3)      Interest part of home loan without any upper limit (Principal part doesn’t qualify for deduction here).

4)      Exempt from wealth tax if it is rented for more than 300 days in a year.

How else can you save tax?

If you have multiple properties, you have the option of choosing one as self occupied and others would be treated as rented. Interesting part here is that you can even choose the one which you are not residing as self-occupied. If you want to save maximum tax, you need to choose the one with highest rental income as self occupied and the rest as rented.

There is another way to save tax. You can register your house in your spouse’s name so that each one will have one property as self occupied, for which there will not be any tax.

  • Vamsee

    Hi Suresh,

    I am a BIG fan of yours as I recently started following your articles and find them extremely useful, I urgently need your expert advice, I am currently residing in Noida in a rented accommodation, however I have 2 Home Loans running, first one is for a property in Andhra Pradesh for which I am getting rental income too, the second property is in Noida which is under construction and possession will be given after 2-3 years.

    I have 2 questions -

    1st Question. How and When can I claim the tax benefit for the 2nd home loan for which possession has not been given

    2nd Question : I am planning to buy a 3rd property which I will use for self occupation, but someone told me that there is a recent update in which there is no tax benefit for the 3rd Home Loan !!!!! I searched online but could not find any such update…..Can you please advise is it true? If not true, can I claim home loan for all 3 houses for tax benefits?

    Eagerly waiting for your response.

    • Av Suresh

      Thank you for the appreciation, Vamsee.
      1) You can claim benefits on under construction houses only after the construction is completed. Exemption can be claimed in 5 equal installments over 5 consecutive years.

      2) You can buy any number of properties or have multiple home loans. You can claim tax benefits on all your home loans. For self occupied property, the limit will be Rs. 1.5 lakh and for rented properties there is no upper limit u/s 24.

  • madhav

    Thanks Suresh, Your articles are useful but
    You stated: If you have multiple properties, you have the option of choosing one as self occupied and others would be treated as rented. Interesting part here is that you can even choose the one which you are not residing as self-occupied. If you want to save maximum tax, you need to choose the one with highest rental income as self occupied and the rest as rented.
    Won’t there be any query from Income Tax as it is easy to find out which property is let out and which one is self-occupied. Your rent agreements are registered, even the PAN of your tenant is in the agreement. You also see the rent income coming to your account. How is it possible to choose a property as a self-occupied when you do not stay in the same city.
    Please throw more light on this part.

    • Av Suresh

      Madhav, stating that a house is self-occupied when it is rented, is allowed for tax purpose only. It dept has provided this exclusively for the benefit of tax payers. Though practically IT department knows it, they won’t question you on this since it has been allowed by them.

      • Ratnanabh

        Dear Suresh,

        Basket of thanks for this tax saving information. I have another doubt. Can u please explain below statement ” Consider House1 Interest paid=4Lacs Rent Recieved =1.8Lacs.House2 Interest paid=1.5Lacks Rent Recieved =1Lacs

        “….to save maximum tax, you need to choose the one with highest rental income as self occupied and the rest as rented”.

        • Av Suresh

          For every case, we need to calculate tax by including rental income and taking deduction of interest. Here, tax payable will be lesser in the case where first house is treated as rented. Hence, in this case, it is beneficial to treat first house as rented and second as self occupied.

          • Ratnanabh

            Hi Suresh,
            Thanks for such quick response. I have one more question regarding ” ….. Interesting part here is that you can even choose the one which you are not residing as self-occupied”
            Can you please share any official document or Link

  • Siva Prasad

    Hai Suresh, Every month, I am paying 9000/- EMI. i.e., 75000/- pa interest paying to bank. Can I get refund this amount while filling tax returns. I am not staying this house and not getting any house rent

    • Av Suresh

      Siva, the only way to claim this amount is through tax filing. You can avail tax deduction on interest up to Rs. 1,50,000 on self occupied property. There is no limit for rented property. In this case, you can claim Rs. 75,000 under section 24 during E-filing or you can state this to your employer for deduction.

  • Umesh Kokate

    Hi Suresh..Good to understand many more info from you.
    One query..I have one loan free property which is register on my wife name where we residing together.
    Recently we bought new property (first name mine and second name of my wife on registarion) through home loan and let it out.
    Housing loan EMI have been paying by me as my wife is housewife.Second property rent amount is going @ my wife account.Towards optimizing tax benefit,please suggest the way.

    • Av Suresh

      It does not matter whose account the rent goes to. You need to show this income as income from house property for which you also get 30% rebate since it is being rented. Also, for rented property, there is no upper limit on home loan interest benefit.

  • Shreeganesh

    Hi, I have a house property (A) in Mumbai (Where my family stays). For job, I am staying on rent at Delhi. Recently I bought another property(B) in Mumbai .This is not given on rent. Can I claim income tax benefit for interest on property (B) under section 24 while claiming the HRA benefit in rent I’m paying in Delhi.

    • Av Suresh

      Yes. You can claim interest benefit from any of these properties. If you are treating the house as self occupied for tax purpose, the limit on this benefit will be Rs. 1.5 lakh. If you treat it as rented, there is no upper limit on the benefit.

  • ambresh

    hi suresh, i fully constructed property in gr noida and doing job in delhi near gurgoan. I have taken home loan and currently living in a rented apartment in delhi near office. as you suggested i can claim both HRA(rs 8300) and home loan tax benefits.My question is If i take company lease (rs 9500 + 600tax), can i claim both lease and home loan tax benefits.My HRA is 9500. which is more beneficial HAR or lease keepin in mind claiming Home loan tax benefits(80C and section 24)

    • ambresh

      which is more beneficial HRA or lease keeping in mind claiming Home loan tax benefits(80C and section 24)

      • ambresh

        i have only a single house. P

  • lait

    hi pl share
    i have take 1st Home loan My Self 1st Applicant my mother 2nd applicant – am paying EMI & home is on my mother name. 2nd i have taken home loan my sellf applicant my wife coapplicant and house on her name . i have not submitted any income proof on my wife & am paying EMI.
    Now can i take 3rd home loan as my wife applicant & my self coapplicant -pl tell

  • NISHIGANDH

    hi,I already have two home loans and I am purchasing third property then my questions are

    1. Can I claim interest portion of third property for deduction?

    2. Is the bank issue interest certificates for claiming the deduction?

    3. Is the interest rates are same for fist, second and third property?

    Please help me.

  • Vishak

    Hi Suresh,
    I reside in a rented house. But I own 2 houses which are under loan. Can I get tax benefit out of HRA for the rented house as well as interest & principal paid for the home loans?

  • Sharma

    I have property in Mumbai. 2nd property in another rural state of Maharashtra costing very nominal price, for which I had not applied for housing loan and not claim any tax benefit. If I have to purchase 3rd property on home loan, can I get tax benefit. Since I had not claimed any tax benefit on 2nd rural property, is it necessary to show notional rental income where my old aged parents staying. Pls help.

  • Sharma

    I have property in Mumbai. 2nd property in another rural state of Maharashtra costing very nominal price, for which I had not applied for housing loan and not claim any tax benefit. If I have to purchase 3rd property on home loan, can I get tax benefit. Since I had claimed any tax benefit on 2nd rural property, is it necessary to show notional rental income where my old aged parents staying. Pls help.

  • chetan

    I own a property in one city, which is currently self occupied and in
    another city, which is let out. I am taking ax benefits on both
    properties home loan interest.

    Now I am renting out the property which is self occupied and moving on rent near to my office (in the same city).

    In
    this case, can I still take tax benefits on both my properties and HRA
    for rented property also? I am going to show rent also from my rented
    out property (which was self occupied).

  • Chetan Hiran

    Hi Suresh,

    I have few question regarding more than 1 home.
    I have a flat in Pune, there is no home loan on this flat as of now.
    I am planning to buy another flat in Hyderabad.
    Wanted to check what things i need to take care while filling income tax.
    I believe I can claim home loan benefits in income tax on my second home. Please confirm.

    Awaiting for your reply. Thanks in advance..!!!

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