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I have a self-occupied house and another house which is deemed to be let out. Both are purchased on home loans. Should I file my IT returns in ITR 1 form or ITR 2 form for claiming tax benefits on the loan interest and principal for both houses?
Jaivishnu KS
As per the ITR forms notified for FY17, Form ITR-1 is applicable for individuals having income from salary, one house property and other sources (interest etc) and with income up to ₹50 lakh.
As your second house property is considered to be deemed let-out and there is negative income (on account of deduction for interest on housing loan) from your self-occupied house, you need to file your income tax return for the FY-17 in ITR-2.
I have taken two housing loans, one from my employer and another from HDFC for construction of two houses (in different years).
Both the houses are rented out. While claiming IT exemption on interest being paid on these loans, can I combine the interest paid on both the loans?
Is there any limit for claiming such exemption? I understand some changes have taken place in the latest Budget. What are they?
AS Ramayya
As per the provisions of Income Tax Act, 1961 (‘the Act’), in case of let-out property, there is no upper limit for claiming the deduction in respect of interest paid on the housing loan against the rental incomes. Further, income from both the houses shall be calculated separately and, thus, the interest paid on the housing loan cannot be combined.
As per the amendment made by the Finance Act 2017 under Section 71(3A) of the Act, where the interest paid on the housing loan is more than the rental incomes (after adjusting for municipal taxes (if any) and standard deduction @30 per cent), that is, there is ‘net loss’ under the head ‘income from house property’, a maximum of ₹2 lakh can be set off in the same year with incomes under other heads. The balance loss, if any, shall be carried forward and set off against the subsequent year’s income from house property. The loss, not so set off, can be carried forward for not more than next eight assessment years.
The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in
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