The home loan entitles a person so claim deduction of interest payable on the amount borrowed and utilized for the purpose of buying or constructing house.
First the postive news ! Under the Income Tax Act 1961 , if you have more than one property, there was provison for taxing notional rent even if the second house was not put to rent. However, under the Direct Tax Code 2010 , such aconcept has been abolished.
Two of the most controversial change in taxation of rental income from house property by earlier Direct Tax Code were -proposal of tax @ 6 % of presumptive rent calculated at 6% per annum of the ratable value fixed by the local authority and abolition of any interest deduction even from one house which is self occupied by a taxpayer.
Revised DTC has abolished both these BAD proposals. Now , revised DTC proposes
(a) In case of let out house property, gross rent will be the amount of rent received or receivable for the financial year.
(b) Gross rent will not be computed at a presumptive rate of six per cent of the rateable value or cost of construction/acquisition.
(c) In case of house property which is not let out, the gross rent will be nil. As the gross rent will be taken as nil, no deduction for taxes or interest etc., will be allowed. However, in case of any one house property which has not been let out, an individual or HUF will be eligible for deduction on account of interest on capital borrowed for acquisition or construction of such house property (subject to a ceiling of Rs. 1.5 lakh) from the gross total income. The overall limit of deduction for savings will be calibrated accordingly.
House rent allowance exemption and interest deduction including 80C deduction for payment of principal amount of loan is one of the most sought after query by readers of this blog. Therefore, when Mr Nag of Banglore asked “I have an independent home in B’lore(under bank loan) and I am staying in B’lore in rented house(3BHK). Can I…