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Home Loan Tax Benefits – Section 24, 80C, 80EE

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Buying a house without home loan is distant dream for most of the people.  But even if you have required funds to buy house, taking home loan can be tax efficient. You can save significant amount of tax on the principal repayment of home loan as well as Interest paid on home loan.

In this post, I will try to explain the tax benefits associated with home loan.

Section 80C – Deduction upto Rs 1.50 lakh for Principal repayment
Under Section 80C, you can claim deduction upto Rs 1.50 Lakh by way of investment in eligible items – Home loan repayment is one of the eligible items.  Read more on 80C deductions

  • The deduction is only for residential house property and not for commercial property.
  • It is available only for purchase or construction of a house and not for renovation, additions or repairs on any existing house property.  You can claim deduction u/s 80C even for under-construction properties.
  • If  you sell the house acquired with home loan, within 5  years from the end of the year in which possession of the house was taken, all the deduction allowed for Principal repayment in earlier years shall be withdrawn. This shall be treated as income of the year in which this property is sold. Also,  no deduction u/s  80 C shall be allowed for principal repayment made during the year.

Please note that you may exhaust the 80C limit by investing in other options.

Section 24 – Deduction for Interest Payment
Section 24(b) of the Income Tax Act allows you deduction for interest payable on loan taken to buy or construct a house property, or even for repair or reconstruction of an existing property.

  • This benefit is available for residential and commercial property as well.  
  • Processing fee paid in respect of home loan and any prepayment fee shall also be treated as interest and can be claimed as deduction u/s 24.
  • You can deduction even if the loan is taken from your friends and relatives besides banks and financial institutions.
  • There is no reversal of interest benefit even if you sell the house before five years as is applicable for repayment benefits.
  • The deduction is available for self-occupied as well as let-out properties too.   The property will be treated as self-occupied property (SOP) or let-out property (LOP) or deemed to be let- out property (DLOP).

For self -occupied property,  the deduction is restricted to Rs. 1.50 lakhs p.a.   Rs 2 lakhs  (increase in Budget 2014 from 1.5 lakhs to 2 lakhs)

For let-out property – you can claim FULL interest.

If you have more than one self- occupied houses–  you have to select one house as self-occupied and the other house/s shall be treated as let-out. For the house treated as let out , you can claim FULL Interest as deduction.

For under construction property –  you can only claim the interest deduction from the year construction is complete and possession taken. However in respect of interest paid for the period prior to the year for taking possession, you can claim aggregate of such interest in 5 equal installments from the year in which construction is completed.

Section 80EE – Additional deduction upto Rs 1 lakh for Interest
Section 80EE allows you to claim additional deduction upto Rs 1 lakh for interest payable on housing loan.  This deduction is available for individuals for AY 2014-2015 (FY 2013-2014) where the Value of residential house does not exceed Rs. 40 Lakhs & Loan sanctioned does not exceed Rs. 25 Lakhs. Also, loan should be sanctioned between the FY 1/4/2013 and 31/3/2014.
Assessee should be first time home buyer and does not own any other residential house as on the date of sanction of the loan.
Read – 80EE Deduction

Summary

If you are in high tax bracket (30%), taking the home loan for 2nd property or let out may be beneficial than buying the property without home loan. For self-occupied property, you need to do calculation to see if this is beneficial as Interest deduction is allowed only upto Rs 1.50 lakh.

Assuming that you pay 10.5-11% interest on your home loan, which after adjusting for tax, will be around 7.50% . So actually you are getting home loan at 7.50% (post tax benefit).

You can invest the surplus funds in tax efficient options (for e.g Tax free bonds yielding around 9%), thereby maximize your earnings.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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About wealth18

The author is a Chartered Accountant and loves to write about Personal Finance, Wealth Management, Taxation etc. Disclaimer - The articles on this website is for informational and knowledge purposes and should not be treated as financial advice, Please consult your financial advisor before taking any investment decision.

91 comments

  1. what if i am into 10% tax bracket?

  2. Thanks for some informative articles.

    In the case of a LET-OUT House(2nd House) if you’re saying FULL interest paid can be deducted then how would it effectively work out to be a loan with 7.5% interest. Shouldn’t we get total 100% exemption for the amount we pay to the bank as INTEREST.

    Also, please clarify if BOTH the deductions (1.5 Lakh limit under 80C & Section-24 FULL interest exemption) can be claimed

    • Hi Gautam,

      For 2nd house which is let out, you can claim Full Interest paid to ban. So if your loan is at 7.5%, effectively you are paying 5.25% (after taking tax benefit).

      Please note that you need to segregate the principal & interest from the EMI you pay to bank every month. You can then claim all Interest paid as deduction from Income from House property.

      Deduction u/s 80C is for Principal amount & Section 24 is for Interest portion. You can claim both.

  3. Dear Vivek,

    I have availed a home loan in 2009 for rs 30Lakh and now i hear that the second home can be bought with full intrest can be used as a tax benefit. From thsi year i hear that there is a tax xtructure change for home loan. I have o nly 5 yrs left for service and i fall in 30% bracket with income tax of 7 to 8 lakhs being paid. how best can i save this?

    • From FY 2014-2015, Interest on housing loan for 1 self occupied property can be claimed upto Rs 2 Lakh.

      So what is your query here ?

      • thanks Vivek, my question was pertaining to second home, where in the interest portion of hte loan can be fully shown for hte tax purpose. So if i paya tax of 7 lakhs, so buying a second home will be beneficial or not?

        • Hi Venkat,

          In case you buy 2nd property on loan, you can claim full interest as deduction. But in that case, you will be paying Interest to the Housing loan company. Also, you need to show the deemed rent as Income from house property for the 2nd home.
          So just for saving tax, it may not be beneficial to buy 2nd property.

          There can be other options to reduce tax if you can tell the source of Income? Is it just salary or Income from Investments etc ?

      • Dear Vivek,

        I was asking you whether if i buy another house i can save 6-7 lakhs the income tax which i pay every year? if i want to avoid paying the tax what minimum loan i should take for my second home?

        • Hi Venkat, I am not sure if you got the chance to read my reply which I post few minutes ago.

          In case you buy 2nd property on loan, you can claim full interest as deduction. But in that case, you will be paying Interest to the Housing loan company. Also, you need to show the deemed rent as Income from house property for the 2nd home.

          So just for saving tax, it may not be beneficial to buy 2nd property.

          There can be other options to reduce tax if you can tell the source of Income? Is it just salary or Income from Investments etc ?

          • Dear Vivek,

            The income is salary income and only benefit i get from income tax is interest on housing loan+ principal+ medical insurance. 1+1.5+0.15 = 2.65 and the remaining salary income goes as tax and i pay tax of 7lakh per year. how do i save this as i am at the fag end of hte career and i want to save for the rainy day.

          • Hi Venkat,

            There are not much avenues to save tax. Pls see below for tax saving options :

            http://wealth18.com/80c-tax-saving-options-deductions/

            http://wealth18.com/tax-saving-options-deductions-under-80d-to-80u/

            —-
            If you buy another property, say for 50 lakhs on a bank loan of 40 lakhs. You will be paying Interest of approx. You will be paying Interest of approx. 3-4 lakhs per annum in first few years. You can claim full interest as tax benefit. If you are in 30% tax bracket, you will save tax around 1 – 1.3 lakh. but anyways yo7u will have an extra interest outflow of 2-3 lakhs. So buying property, just to save tax doesn’t make much sense.
            However, if you were anyways thinking to invest in property, then you can go ahead as it will save some tax on Interest portion.

  4. Hi Vivek,

    One more question to you. I had got my house renovated starting from 2012 to 2014. I had spent almost 15 lakhs, bu twith my own money. How can i show this in tax using Section 24.

    • Hi Venkat,
      For self occupied property, you cannot claim such improvement costs as standard deduction.
      But, you can claim such cost of improvement, if you sell the property. In that case, you can use this as indexed cost of improvement & deduct from Sale price for purpose of calculating capital gain.

  5. Dear Vivek,

    Thanks for your replies to all my mails. But i still have some doubts. when you say the second home loan is good to save taxes and you gave an example of 50L house and a loan of 40 lakhs, and as per you i can save only 1.5 lakhs if i am in 30% bracket……but i thought that whole of interest that is around 4lakhs can be saved. According to you only about 25-30% can only be saved. Please explain how much can be saved from second home loan for different tax brackets.

    • If you have interest of around 4 lakhs, you will claim this deduction from your income. Then as per your tax bracket, you will save tax.
      So, if you are in 30% tax bracket, you will save 30% of 4 lakh = 1.2 lakhs in taxes.

      Feel free to comment if you are not clear.

      • Dear Vivek,

        thanks Vivek for your patience and explanation. But i must admit i have not understood the calculation. Please explain me once again Vivek…….sorry for being a dumb person. So if ihave to pay tax of 7 lakhs, becoz of my second home cost of 50L and loan of 40 L i will pay monthly 40,000 rs and yearly about 4.8 Lakhs ruppes. all these 4.8 lakh rupees will be shown as deduction from my income. I guess this is a huge amount. Same way as they show deduction of 1.5 (now 2 lakhs) from my salary for the first homeloan. Second home loan deduction is bigger right? So savings are high? Why saving becoz after say 5 years i can sell it. It may fetch 80L (very modest) and also i saved 4X5= 20 lakhs being taxed from my taxes. So inturn the money is doubled in my hand. Or am i missing anything on this?

        • Hi Venkat,

          When you pay 4.8 lakhs as home loan interest, you just save Tax not the whole amount. As you would have anyways saved the amount – applicable tax.

          So your saving will be just 30% of 4 lakh ( as out of 4.8 lakh, Interest will be around 4 lakh) = Rs 1.2 lakh.

          So by taking this home loan, you will just save additional Rs 1.2 lakh anually.

          • I understood what you were saying …..after one year. So as per you i dont save much from the second home loan as only 30% of interest is going to be saving, So what are the other options of savings you advise. I am a salaried person.

          • Hi Venkat, please explain your query.

            If you are in 30% tax bracket, 2nd home loan may be beneficial. As you can claim deduction for full interest from the Income / Deemed Income.

  6. Dear Vivek,

    I have a question. I have 2 property. Both purchased through loan.I took one loan of 25 lacs(FY 2009-2010) and other 20 lacs(FY 2013-2014).

    Can I claim for tax benefits for both my loan amount.I mean additional deduction of 1 lac for interest(FY 2013-2014) for the 2nd loan

    • Hi Anups,

      1) You cannot claim deduction of additional 1 lakh u/s 80EE as this is applicable for first time home buyer only. Read eligibility criteria below:

      http://wealth18.com/section-80ee-additional-deduction-for-home-loan-interest/

      2) You can claim deduction for Home loan interest

      a) upto 2 lakh ( for self occupied property)
      b) unlimited – for 2nd property which is deemed to be let out. In that case, you also have to show “Deemed Income” under Income from House property.
      You can claim interest only when the possession is given. You cannot claim for under-construction property.

      • Hi vivek,

        I have one question for your point b).
        You also have to show ” Deemed Income” under Income from house property.

        If i did not let out this property, and i used it for myself only, say 15 days i stay in my first property and 15 days on other. OR if i did not let out 2nd property. OR if i have let out but the rent i am taking is very less ex: 2000 only ( in this case i will mention 2000 only is it acceptable?)

        Then what to be done in above cases?

        • Hi Pawan, You can only treat 1 property as your self occupied property.
          Other property will be deemed to be let out, whether you actually let out or not. Deemed income will be as per market rate.

          You can show that your have rented at very less amount, but that will be picked up by Income tax dept in case the return comes under scrutiny.
          Realistically, you will be letting that property out rather than keeping vacant. And now, the tenant will also need PAN of landlord to claim HRA.

  7. Hi Sir,
    I had purchased a flat in 2008 for my relative. I re registered it under his name in 2011 and transferred the loan to him. Now I have purchased a flat jointly with my spouse. However, i am staying in a rented house in a different city. Can I and how much exemption can be claimed under section 80ee. Please guide.

    thanks

  8. Hi vivek,

    My wife is also a tax payer and working in an MNC, We want to buy one 2BHK flat.
    If we will take loan for 40L , then can we claim 4 L as tax exception(2L , 2L each).

    • Hi Pawan,

      If your wife buys property in her name with loan in her name, she can claim interest upto Rs 2 lakh (apart from what you claim for another property)

  9. Hi Vivek,

    I have two properties in Pune. H.Loan on first property is cleared last month, August 2014. Last year I purchased another property with loan amount totaling INR 40 Lakhs. Got possession in May 14. The EMI for second property is @ INR 37 K. For second property my wife is co-owner and co-applicant as well. The whole EMI goes from her account. Second property is not yet rented and looking at trend I dont think for remaining financial year I will be able to put it on rent.
    For FY14-15 my principle n interest on first property were INR 1.2 lakhs and INR 2 K respectively. Yet neither me or my wife to claim tax benefit on second home loan. Your guidance requested to solve the puzzle..
    1. Can we both claim tax benefit out of the second home loan? Which one you suggest; Second property is my wife’s first property, that too co-owner and mine second.
    2. Yet not able to let second property on rent. But I am paying property tax and society charges for water; its a prepaid water system.

    Please help…

    • 1) regarding the principal amount, you can claim deduction for 1 self occupied property.

      2) reg your second property, your wife can claim home loan interest of Rs 2 lakh and principal upto Rs 1 lakh.

      The Balance interest you can claim. but as this will be your second property, you will need to show Income form house property for deemed rent / let out. You can also claim 30% od deemed rental as standard deduction.

      • Thanks Vivek..
        Home loan on first property is over. It’s no more.

        Can I claim only interest part of the 2nd property in my tax declaration? The amount is almost INR 3.5 Lakhs. And my wife claiming only principle part of the 2nd property? Please guide

        • 1) You can claim principal for 1 property only.
          2) for 2nd property, youw wife can claim principal as well as Interest of Rs 2 lakh. You can claim balance interest, but you need to show the Deemed rent as income.

  10. Hi Mr. Vivek,

    This is a query regarding a commercial property and its tax implications….
    – I have bought a commercial property (an office) in May’14 by taking commercial loan of 36 lakhs. The loan is in joint name – myself as applicant and my wife as co-applicant.
    – I am the first owner and my wife is the co-owner with each having 50% share (as declared in society document)
    – Yearly outgoing of loan is about 6.25Lakhs (Principal:2.00 Lakhs, Interest: 4.25 Lakhs)
    – Gross Rental income is Rs.27000/month.
    – Myself and my wife both are already taking benefits of 80C.
    – This is the second property in our joint name.

    Please advise us the following….
    a). Can I or my wife or both (50%each) claim full interest component of yearly loan re-payment towards deduction from rental income ??
    b). in future can both of us avail principal component (max.1.5 Lakh) as deduction from Gross yearly income ??

    Thank You !

    • 1) 80C deduction in respect of principal amount is only for Residential property & not for commercial property.

      2) As your commercial property is on rent, you can claim whole interest portion as deduction from Income from Property

      • Hi Vivek,

        Request one more clarification on interest component……..

        Can I or my wife or both claim full interst component towards deduction from rental income ???

        Thank you !

  11. Hi MR. Vivek

    I had purchased home for my parents in 2009, & claim both principal under 80C & interest under 24(b) as well as HRA (FY 2014-15 ,principal – 147000 & interest 12000 INR),This is my first property &home loan is still running,Now in October 2014 i had purchased another home for me.(principal – 11000 & interest 75000 INR) currently 2nd home is not rented

    1.can i claim principal & interest from 1st home loan (self occupied property)

    2. can i claim full interest for 2nd home loan( let out property) & also HRA because 2nd home is under maintenance (old property)

    Thank you!

    • 1. You can claim Interest for 1st loan as 1 self occupied.
      2. you can claim full interest if the 2nd home is let out / deemed to be let out

      you can claim HRA if there is reasonable explanation of not living in your own property and need to live in rented home .

  12. Hi Vivek,
    I’ve a self-occupied property for which I’ve a home loan. I’m claiming on the interest and principal components.
    Now I recently bought a commercial property (a shop) by taking a Top-Up loan on my existing home loan. So two queries regarding this:
    1. Is it legal for me to take a top up on a home loan and invest that money for another commercial property? If not, what are my options now?
    2. Can I claim tax benefits on the interest component of this top up loan , and use it to setoff against the income from commercial property rental?
    3. If answer to 2 is No, can a top-up loan be converted to a commercial loan?

    Rgds

    • 1. Top up Home loans can be used to meet personal requirements (other than for speculative purposes) which includes furnishing your home, higher education, purchase of furniture, business requirements, children’s marriage. I believe it will be OK to buy commercial property as well.

      2. Income from house property in general is taxable under the head “Income from House property”. You can claim 30 % of annual value (rent) as deduction in respect of repairs etc. You can also claim the Interest paid as deduction.

  13. Hi Vivek,
    I have a 1st home for which the outstanding loan is about 18 lakhs. I am planning to buy another apartment (under construction, possession about 5 yrs away) that costs about 55 lakhs. I will be able to arrange of my own about 25 lakhs (from my savings + some monetory share from my parental property). But I still need about 30 lakhs loan from bank to purchase the 2nd flat for which I may not be eligible right now as my monthely gross income could be litttle low. At least that is going to be the case for next 2-3 years until I get my next salary raise. The second option I have is that I repay my 1st home loan (partly or completely from my savings) and then go for the higher loan amount for the 2nd flat. But after reading various threads on internet, it seems clear that foreclosing the 1st home loan is not the best strategy for saving taxes. What do you think would be the best things for me to do?

    • 1) Whether your first home is self occupied or under construction ?
      2) Check with yoru bank if they can provide loan of Rs 30 lakh for your next home purchase. If not, you donot have much options.

      3) For self occupied property, you can claim tax deduction upto Rs 1.50 lakh interest. and for 2nd property (deemed to be let out), you can claim ALL the interest without any limit.
      So from tax purpose, it is better to have large interest portion on your 2nd property ( not self occupied).

      Also note that, on your 2nd property, you can only claim interest after its possession.

  14. Hi Vivek,

    I have current home loan on 1st property and i bought the 2nd property (possession Dec 2016). !st property EMI is 20K and 2nd property EMI will be 65 K (starting Aug 16 till that time i will be paying only Interest).
    Please help me on queries below:
    1) If i close my first home loan after starting EMI on 2nd home, I can claim total interest paid and i let out the property or both home loans should be running to claim total interest paid on 2nd home.

    2) interest paid during pre-construction period will be part of 1.5 lakhs limit or above that.

    Thanks
    Amit

    • Hi Amit,

      1) For 1 self occupied property, you can claim interest upto Rs 2 lakhs
      2) Your 2nd property will be deemed to be let out and you can claim FULL Interest without any limit. However, you need to show the rental income or notional rental income.
      3) Interest paid during construction period can be claim in 5 installment after possession. The amount to be claimed depend on whether it is for self occupied or deemed to be rented.

  15. I have purchased a commercial shop in mumbai, have taken doctor’s loan to fund the purchase. The loan is an overdraft loan of 20 lakhs. The EMI has only the interest component for every month at 21000, irrespective of any principal amount. The amount paid over and above this is considered as principal payment and accordingly the interest component will be adjusted. Currently i am planning to give shop on rent and then start my clinic in a years time.
    My query is regarding the tax benefit on interest component. I know that I cannot claim principal payment u/s 80C as it is commercial property and also the income from rent is taxable. I am planning to reduce the principal amount by paying off around 5 lakhs in a year. Will then the total interest paid during the year be eligible for tax deduction u/s 24 especially since its an overdraft doctors loan and the interest paid every month may be variable?

    • the amount of interest doesnot matter. You can claim all the interest paid as deduction under income from property.

  16. Hi Vivek,

    Following is the scenario:

    We have following properties,
    1. A house on my name purchased 3 years back. (House 1)
    2. Second house jointly owned by my wife and I. Loan is also jointly borrowed. (House 2)

    Now the questions are:
    1. Can house 1 be my self occupied home and house 2 as let out home; while at the same time house 2 as self occupied home for my wife?
    2. Resultantly, I will claim principal (upto 1.5 L) and interest (upto 2 L) on my self occupied property. I will also claim interest on house 2 which is my let out property. At the same time, my wife will claim principal (upto 1.5 L) on house 2 which is her self occupied property.

    I know that she can claim interest upto 2 L on house 2; however my tax benefits are higher so I would want to claim complete interest benefit on house 2 while she will only claim the principal part.

    • If you want to treat the other property as let out, then you should be getting rent from your wife.
      If your wife is paying rent for that house, she can claim HRA but not the principal as Self Occupied.

      1. You can claim Principal & Interest for first house as Self Occupied
      2. You can claim full Interest for 2nd house, but need to show the rent received from your wife. This rent received will be your Income under House property.
      3. Alternatively, your wife can claim the Principal & interest for 2nd house as Self Occupied.

  17. Dear Vivek,

    Nice article and congratulations on resolving too many queries.

    Kindly do advise on my query too.

    I don’t have any residential property as of now but want to purchase 1 against homeloan sololy for Renting out purpose (in my home town) whereas I will be living in a rented accomodation in my workplace city (different from my hometown).

    So following question arises:
    1. Will I be eligible to claim total interest payout for tax exemption ?
    2. Will I be eligible to claim deduction w.r.t. principle amount repayment ?
    3. Will I be eligible to claim HRA ?

    Your earlier responses cleared one thing that rental income will be added to my taxable income but I am not sure about above 3 queries.

    Regards
    Gaurav

    • Hi Gaurav,
      1.for rented property, you can claim whole interest as deduction
      2. wrt Principal amount , you cannot claim benefit u/s 80c, as you can clam only if it is made for a self occupied house
      3. yes you can claim HRA

  18. Indranath Banerjee

    Hi
    Great to have advise from you. I have following scenario-

    1.I purchased a flat on September 2010 and got possession on May 2011. I am on Home Loan with SBI. Can I sell this house now and reinvest in another one? What would be tax implications please?

    Thanks
    Indranath

  19. I have done prepayment of my home loan, apart from paying regular EMIs.
    can prepayment of principal amout be claimed under 80c ?

  20. i took a housing loan of 30 lak from bank two years back to purchase my first house. This loan is joint loan along with my husband. We stay in a rented house and we have rented our flat ( which has 30 lak loan). Now we have brought another flat with the loan of 40 lak (this is for an under construction property and 30 lak has been disbursed). Now could you please what should be the tax implication of these two flats? can i also claim HRA and show the rent i am receiving as income. can both of claim tax benefits? please help.

    • Please let me know in which city are you renting and in which cities you have these flats.

      If your purchased flats are in different city that where you work, then you can claim both HRA & home loan benefits.

      For the under-construction flat, you cannot claim any deduction now.
      For another flat, you can show the rental income and claim the full interest amount as deduction.

  21. Hi Vivek,

    I have a doubt from last couple of months and not able to find the answer. In case of home loan taken from relative. Is there an upper limit on the rate of interest paid to the relative.

    e.g. Can I take Rs. 20Lakhs from my father and agree to pay 20% per annum as the interest rate to him. Of course my father will pay the eligible income tax to him.

    • Hi Puneet, There is no such limit defined for interest paid to relatives.

      However, make sure that you document the loan accurately in terms of lender’s name and your name, the loan amount, the repayment tenure and the rate of interest. Ensure that you take the loan by cheque and make repayment by cheque.

      You will be able to take benefit u/s 24 but you cannot claim benefit u/s 80C regarding principal repayment

  22. Dear Mr. Vivek,
    One of my colleague purchased a plot for construction of a house in the month of May, 2014 for Rs.12,00,000/- through India bulls a housing finance and paid Rs.96,000/- towards stamp duty and registration fees. No construction work was initiated till date. Weather he is eligible to claim income tax rebate under section 80C of income tax.
    Thanking you,
    Yours faithfully,
    R.Thangavel

    • You can claim deduction for stamp duty and registration fee only if the construction of the property is completed and you have possession of the house.

  23. hai vivek
    i am planning to bulid a commerical buliding, the estimated budget will be 70 lacs, if i take a loan in the bank is i am eligible for the tax excemption

    • Hi Kiran,

      There will not be tax exemption. But you can claim the interest amount as business expense against your business income.

  24. whether sec 80EE is applicable to individual resident and non-resident both or only resident individual

  25. Hi Vivek,

    I have one query regarding Stating EMI of my Home Loan. I took home loan in Jan-15 from SBI with the EMI start date in May-15 so I just wanted to know if its OK to start EMI payment that late or I should start EMI as soon as loan got disbursement i.e. Feb 15. Am I losing any money by starting EMI after 3 months of loan disbursement.

    Thanks!

    • Hi Sultan, there is no problem in starting EMI late. Normally, they start emi next month of disbursement.

  26. Dear Vivek,

    I am planning to buy a house purely for investment purpose in Mumbai. I am planning to take a home loan of around 1 crore for this. I wanted to understand the tax benefit both on principal and interest that I can expect. Also, I got to know that one can claim the full interest paid in case one is not staying in the property. Request your help and support to understand the whole calculation.

    Regards
    Harshad

    • For the property which is not self occupied, you can claim the full interest as deduction. But at the same time, you need to show the rental / deemed rental as Income.

      For self occupied property, you can claim deduction upto Rs 2 lakhs for interest.

  27. Dear Vivek, your article and readers comments are interesting. I have taken first home loan at my hometown (madurai) and my father is living in that house. Now i am taking Second home loan in chennai (where i work), obviously i’ll be living with my family here. Right now, i live in rental house and availing the tax benefit of rents. a) If i move to my new house, i’ll loose the tax benefit for Rental amount. Is it right? b) Should i mention the net interest value (calculated as per formula) in ‘Let Out property’. It will come in -ve as the interest amt is much higher than the rent value ? c) What is the proof i should submit or where should i mention the Deemed rent income?

    • Hi Ranjith,

      1) Once you move into your own house, you cannot claim HRA benefit.
      2) You need to show the Annual rental value as well as interest paid for that property. the good thing is there is no limit on the interest amount.

      For self occupied property, the interest deduction is given upto Rs 2 lakkhs.

      You need to take the Interest certificate / repayment schedule including interest. You donot need to submit the documents with the Income tax returns, but keep it handy in case of any scruitny.

      • Dear Vivek, Thanks for the clarification. The points which doubt me are, if Second home is Self occupied (first also self occupied), then interest deduction is limited to 2Lakhs. If second home is rented out, then there is no limit for interest amount. I am confused here with the interest deduction. At the top of this page, it is written that “One house has to be self occupied and other will be considered as Let out. For the Let out property, one can CLAIM full interest as deduction”. It means i can avail the full interest exemption no? Please correct me if i am wrong.

        • Hi Ranjith,

          For the house in Chennai (where you will live), you can claim interest deduction upto Rs 2 lakh.
          For the other house, it will be deemed to be rent out. You need to show the deemed rental value as Income and then you can claim deduction for FULL interest amount.

  28. My son is now NRI. He is have a flat on which he has taken loan from Bank. He has given his flat on rent. Can he claim rebate of Housing loan intrest under sec. 24 and capital under sec. 80C

    • Hi, Whether the home and home loan is in India. if yes, he can claim the interest as deduction under Section 24 and also 80C benefit.

  29. Dear Jain,
    Can i show my Chennai house as let out property (to avail full interest deduction benefit) and the other house as self-occupied? If this is possible, it will be beneficial for me. Though it is illogical to say that i work in chennai, but from madurai, i want to know if this is Ok, as i have the option to choose either house as let out property. Please clarify.

    • Hi Ranjith, If you are working in Chennai & living in your own home in Chennai, you will need to show that as “Self Occupied”.

      You cannot choose Madurai home as Self occupied.

  30. Hi Vivek,

    I have two flats, both the houses are rented. The home loan interest that i pay for both homes exceeds that of rent i receive from these houses. Do i still need to pay tax on rent i receive?

    • Hi Naresh, You can show the rental income from both the properties and claim the full interest paid. If Interest is more than Income, then you can carry forward the losses to next year for adjustment.

  31. Hi VIVEK SIR,

    I am bit confused.

    i am having my own house where i m staying.
    Recently i bought my second home with loan.
    Say total of yearly EMI i pay is apprx 480000 for second house.
    Out of that 390000 is interest and rest 90000 is principal.

    I am receiving yearly 72000 as rent from my second house.

    Now please tell me how much income tax exemption i can get from the above scenario ?

    also

    If i keep my second house vacant , how much income tax benefit i get ?

    Please explain in detail with the figures.

    • 1) As your second house is rented, you can claim full interest as deduction.

      Income from House property 1 – claim deduction for Interest upto Rs 2 lakh

      Income from property 2: You can claim 30% standard deduction + full interest

      72000 – (21600+390000) = -339600

      Even if you keep 2nd house vacant, it is treated as deemed to be let out and same as above applies. Instead of actual rent, you need to show estimated rent.

      You can also claim deduction for Principal amount u/s 80C.

      • THNX FOR REPLY SIR.

        You mean i can also claim deduction for principal amount u/s 80C. on the second house also?
        As my 1st house is loan free where i am staying.

        • Hi Kejal,
          Yes, you can claim deduction u/s 80C for repayment of principal portion of the loan, with an overall cap of Rs.1.5 lakh irrespective of whether the property is self occupied or rented.

          • THANK YOU SIR FOR YOUR GUIDANCE ,

            SIR,

            AS I COMES TO KNOW THAT I CAN CLAIM PRINCIPAL PORTION OF THE LOAN UNDER SEC.80/C ON SECOND PROPERTY ALSO ,

            CAN ONE CLAIM THE SAME ON 3’rd or 4’th PROPERTY TOO ?
            OR
            IS THERE A CAP/CLAUSE TILL TWO PROPERTY ONLY ?

          • Hi Kejal,

            There is no limit on the number of properties. But total limit under 80C is Rs 1.50 lakhs (including other eligible investments).

  32. Hi

    For Loss of Income under house property (Let out), I understand there is no limit for exemption on the interest paid. However if we sell the property before 5 years, does the exemption get reversed on interest also?

  33. Hi, I have inherited a property of which I am the joint owner with my mother and brother. This property I inherited in 2013. In April 2016, I purchased my first residential self-occupied property.

    Can I claim deduction under section 80EE as a first time home buyer?

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