Nov 17, 2009

Answering Readers’ Questions # 3: Home Loans Queries

Photo by occam

In this post, I’m going to answer various queries asked by readers regarding claiming tax benefits on home loans in India under different scenarios such as home loans for second house, claiming both HRA exemption as well as housing loan interest deduction and tax concession on joint home loans.

If you would like to understand the basic provisions of Income Tax Act, 1961 regarding eligibility of home loan interest under section 24(b) and principal repayment u/s 80C, read this post.

Home Loan Queries

Considering loss from House Property while calculating TDS from Salary

Q1: While planning my Income tax for the year 2009-10 in my office are not considering my interest on loan u/s 24(b) over & above Rs. 150000/-. I was told that only income will be considered for my TDS calculation not loss.

Is it wrong to consider income from Salary & Income/loss from House property for calculating TDS for the year 2009-10? Kindly do clarify me at the earliest.

I do not want my employer to deduct more TDS and finally land up in IT office to take refund may be 2 years later. [By Chandra Kanth B, Email: chandrakanthb [at]]

Ans: Regarding set-off of loss from house property while calculating TDS on salary income, it has been specifically provided u/s 192 that loss from house property (irrespective of whether self-occupied or rented out) can be taken into account by the employer while calculating tax on salary income.

However, if it is your self-occupied property, loss can’t exceed the amount of interest deduction allowed under section 24. Put another way, loss from a self-occupied house property can’t exceed Rs 1.5 lakh.

But, if it is let-out or deemed to be let out, then the amount of loss can exceed Rs 1.5 lakh. But in such a case you need to provide your employer with detailed computation of loss from house property [i.e. Annual value less municipal taxes less standard deduction u/s 24(a) less interest on home loan u/s 24(b)].

Now, decide yourself whether the action of your employer is justified or not.

Joint Home Loans

Q2: I have a query regarding Home Loan. I will be purchasing a home with my name and my mother's name (as co-applicant). Also loan is in my name and co-applicant as my mother. I am planning to pay all EMIs, so can I opt for tax benefit on complete interest and principal (limited under section 80C and whatever) or will only be eligible for partial benefit as my mother is a co applicant (although not paying any EMI). Please help. Thanking you in anticipation. [By Nikhil Agrawal, email:mrnikhilagrawal [at]]

Ans: It is not mentioned whether co-applicants are also co-owners.

There are two possible scenarios:

a.) Your mother is also a co-owner: In such a case while you can claim only proportionate part of interest u/s 24 according to your share in property (even though EMI’s will be paid entirely by you), principal repayment can be claimed fully (subject to limit of Rs 1 lakh u/s 80C).

b.) Your mother is not a Joint-owner: Here, you’ll be allowed entire interest (subject to maximum limit of Rs 1.5 lakh, in case of self-occupied house property) as well as principal repayment (maximum Rs 1 lakh).

Claiming HRA as well as Interest on Home Loan

Q3: I have an interesting question on HRA and house loan. I have two houses (A1 and A2) in city A (A1's home loan is closed and rented out. A2 has home loan and is currently occupied by my parents). Now I have moved to city B as I changed my job and so rented out a place in city B. Now my question is:

1. Can I claim HRA for the house that I am currently staying in city B?

2. Can I claim house interest deduction on the home loan that I have taken for house A2?

Your response will be highly appreciated. Thanks in advance. [By Wasim Raza, email: wasim.raza [at]]

Ans: Yes, you can claim HRA exemption under section 10(13A) of the IT Act for the house you’ve rented in city B. Point need to be noted is that there is no co-relation between claiming HRA exemption and claiming housing loan benefits under Income Tax Act, 1961.

Yes, you’re also allowed to claim interest deduction u/s 24 and principal deduction u/s 80C on home loan taken for house A2. It will be considered your self-occupied house property for tax purposes although you’re staying in rented accommodation in another city on account of your job and accordingly you’ll be entitled to claim tax benefits on your second home loan.

Interest on Home Loans: Second House

Q4: I am private company employee. I stay in Ahmedabad city. I purchased my recent home in 2004 with house loan from bank. I took tax benefits. I repaid the loan in 2006 or 2007. I am staying in the same house. And since repayment of home loan I do not claim HRA or anything else. I purchased another house in same city – Ahmedabad in January, 2008 which I have given on rent. I pay EMI of around 22000 and get rent around 6000 per month.

My query is can I claim second house home loan benefits- entire interest amount (no limits for second house loan) – rent income as per 24(b)?

Ans: Yes, of course, you can claim the entire interest on housing loan u/s 24(b) since there is no limit in case of rented house property.

For the purpose of claiming tax benefits of home loans, there is no limit either to the number of houses you can own or to the number of home loans you can avail.

Q5: Myself is a salaried person working with Private Company in Gurgaon. I am having one flat in Ghaziabad which is rented out. I am planning to purchase another flat which will again be rented out. My questions are

1) Can I sign off the amount of Loss from house Property for loan availed on the both the properties?

2) Whether limit in my case would be u/s 24(b) would be 1.5 Lacs/house i.e. 3.0 Lacs for two houses.

Kindly reply in two contexts

1) If I also stay in Ghaziabad in my parental house and I am giving rent to my Father.
2) If I stay in Gurgaon on rent. [By Manish Gambhir, email: mgambhir_1001 [at]]

Ans: Yes, you can avail deduction u/s 24(b) on both the house properties. Furthermore, there is no limit for interest deduction in case of rented property. In other words, the limit of 1.5 lakh doesn’t apply in case of let out house property and you’ll allowed actual amount of interest paid (even if exceeding Rs 1.5 lakh) while calculating income / (loss) from both the houses.

In your case for the purpose of home loan interest deduction under section 24(b) of IT Act, 1961, it hardly matters whether you reside in Gurgaon or Ghaziabad. It is also immaterial whether you are paying rent or not. Similarly, it doesn't matter whether you pay rent to your father or to any third person.

The above factors will matter only if you want to claim HRA. These factors will also be relevant if either one or both of the houses is not rented-out. For further details read this post.

If you’ve any question relating to home loans, ask in the comment section and for other queries mail directly to feedback [at] themoneyquest [dot] com.

Also see:

1. 8 Tax Considerations to Know while buying a Property

2. 4 Ways of claiming HRA Exemption with Home Loan Tax Benefit

3. Home Loan Tax Benefits: Section 80C vs. Section 24(b)

4. Home Loan EMI Calculator in Excel


  1. I have been paying a current EMI of 25000 for my home loan for the last 2 years. Now I can affort to shell out anoth 5000 per month for this loan. There are 2 options
    1. Increase my Monthly EMI to 30,000 [OR]
    2. Every month do a part prepayment of 5000 (towards outstanding principal).

    Can someone suggest which of the above option is cost effective ?

  2. My wife has availed a housing loan in her name and the property is also in her name. She is availing tax benefits. We intend buying another house and we both will be the applicants and co-owners. If only I avail the tax benefits for the second house, will I be eligible for FULL tax benefits both for principal and interest repayment?

  3. While you can claim the section 80C deduction for the entire principal repayment, the deduction u/s 24(b) for interest paid will be allowed in proportion to your share in the joint house property.

  4. request you to clarify two point: My wife and I will be buying a second house and we both will be co-borrowers and co-owners. If only I avail the tax benefits, how do I calculate my share in the joint house property for claiming tax benefits (interest part)? We have a joint bank account and the EMI will be paid from this account.
    She is a single borrower and owner of our first house (where we currently stay). Can she avail tax benefits towards interest repayment for the second house as well? We will be letting out our second house. Thanks

  5. Dear Sir,

    Below are details of 2 houses purchased by me. The post seems to be long, but..

    I have purchased 2 homes in Pune and both are having loans. Both of them are completed (possession taken). In one house, my parents are staying. In 2nd home, I am staying.

    1st Home details:

    • It was purchased as a resale property. I am the only owner for it.

    • Annual Interest paid = 45,000 Rs

    • Annual Principal paid = 25,000 Rs.

    2nd home details:

    • It was purchased as a new property.

    • I am the first owner and my wife is the co-owner. She has provided a declaration that she will not be availing any benefit. We have provided this declaration in my company.

    • Annual Int. paid = 3,50,000 Rs.

    • Annual Principal paid = 70,000 Rs.


    1) I would like to know whether I can claim the tax benefit on both these loans.

    2) From IT tax benefit: I am planning to show the 1st home as self-occupied and 2nd home as rented even though I am staying it 2nd house with my wife. Is this possible? Is this approach correct?

    If it is possible,

    • I am showing 45,000 Rs. as interest (1st home) which I know falls into 1,50,000 Rs bracket but short of it. Please let me know if my understanding is correct.

    • I am combining principal amount for the 2 loans (70,000 + 25,000) which gets covered under 1,00,000 investment bracket of 80 (c). Please confirm.

    • Since I am showing the 2nd home as rented (let out), my calculation for income from 2nd house will be as follows:

    o Annual Value (Rental Income): I have considered 15,000 as notional rent Rs per month. = 1,80,000 per year. This is a notional rent since I am not getting any actual money.

    o 30% as the standard deduction: 54,000 Rs.

    o Interest Payable on home loans: -3,50,000

    Hence net income will be: 1,80,000 – 54,000 – 3,50,000 = -2,24,000 Rs. Is this figure correct?

    If it is correct, this entire amount of 2,24,000 will be deducted from my net taxable salary?

    3) Also, I am showing this entire data to my company from TDS perspective. I will not be showing this into IT returns. Do I need to show this data in IT returns as well?

    Thanks and Regards,

  6. Hi, i'm a novice to understand Home Loan technicalities. I've booked a flat in March'10 and the tentative delivery date is March'13. I need a home loan for about 24 lacs for 20 years. I'm planning to take it from IDBI. What are the things that i need to be aware of before setting a deal with the bank? What are the common pitfalls that a novice can ignore while signing the papers? I'll be greatfull if i can get a checklist (if possible). I can pay large sum of money (example 1 or 2 lacs) after say 5 years or 7 years. So i need that clause in the agreement also. Finally, is IDBI a good choice? If not pls suggest a good bank.

    Thanks in advance

  7. AnonymousJune 22, 2010

    I have a house in City A and that is rented out( say 4500/month) and staying in another rented house( rent say 8000/month) in City A .I am working in City A and so staying also there. I have another house in City B and construction is over and that will be also given for rent .As such the completion papers are not given to Bank, the EMI has not started ,but a fixed interest is being paid to the bank now (for a period of 1 year from last Nov). I will be letting out that house also shortly (say 2500/month). What are the tax liabilities and the calculation for preparing the tax sheets for the Financial year 2010-11.

  8. Sir,

    I have taken a housing loan from HSBC and paying regular EMI.
    In this house, I have 2 portions.
    One portion is given out for rent and we live in the other portion.

    If the house is given out for rent, then the entire interest amount can be claimed as deduction under "Loss from house property" (it is 1.5 Lakhs for self occupied properties).
    Now, in my case (where part of the house is rented out), can I also claim entire interest for deduction?
    Can you point me to the right section in the IT Law which clarifies this?


  9. Hi, I've looked at a site which is yet to be built as an apartment and will be completed in 2 years. How is the home loan provided and what will be the loan provided to me for these 2 years ? How should the registration be done incase I need to sell it off. Incase I take a loan, are there any tax benefits. If I decide to dispose / sell it off in a year after it has appreciated, then how should I go abt it and what are the rules and regulations in selling them. I particularly hear abt Capital Gains Tax. What is this ?? Please let me know the answer to this query as I'm a novice in this area and do not have much an idea.

  10. I have purchased a flat 1 year back, however as the construction & amenities provided by builder is not upto the mark so I want to sell it off & I want to purchase another flat under good construction/reputed builders construction.My housing loan tenure is 10 years.Could you please guide me what procedure/steps I will have to follow to purchase another flat by selling the current flat.
    Shall I have to transffer the loan to the person to whom I will be selling?Kindly provide me the guidance

  11. Dear Blogger of 'The Money Quest',

    First of all my sincere thanks to you for writing this blog. It really educates me a lot and helps me to lead a wealthy life.

    I've a query to you regarding housing loan per-repayment of principal while the loan is in partial disburse sate (the loan amount is not fully disbursed).

    In details:

    - I booked a FLAT which is under construction
    - For that, I opt for home loan from SBI (EASY HOME LOAN product)
    - The load got sanctioned for 35L on Dec 2009 but the payout(disburse) of the loan amount is linked with the progress of the my flat.
    - So for, I the bank disbursed 20L as my flat progressed
    - The repayment(EMI) will start in one of the following cases which ever comes first.
    1. on July 2011
    2. after completion of my flat (i.e. once the full loan amount is disbursed)

    - And I don't need start any repayment(pre-EMI) before the EMI commences.
    - But the interest will be calculated for the partial disburse amount and it's accumulated(again, interest is applicable for the interest) in my loan account.
    - From my loan account statement, I can see around 1.5L is accumulated a interest for the partial disburse.
    - Meanwhile, I've saved around 5L from my salary and put it in a FD (in a different bank) where the interest rate is lower than the home loan interest.

    My question here is:
    Can I pay 5L towards my loan account now? (1.5L towards interest + 3.5L towards principle)
    I asked the same question to my SBI bank manager, he confirmed about the interest part (1.5L) but he is not sure(he don't know the T&C) about the principle part. He recommend me to not payback the principle now but after the EMI starts.
    My problem is, loosing money because of,
    - the interest difference between my FD and my home loan
    - and the TDS for interest earned form my FD.

    And I fear, if any penalty applicable for if I prepay principle(3.5L) at this stage.

    Thangavel P N

  12. Thangavel P N,

    Pre-payment penalty will be as per the terms and conditions mentioned in your loan agreement; just read it thoroughly.

  13. Me and my husband both have purchased a flat with 50-50 ownership and same for joint home loan. Now EMI is going from my husband account as ECS. Both of us are earning and almost same income. Can both of us avail tax deduction on both principle amount and interest or my husband only can get that

  14. Me and my husband both have purchased a flat with 50-50 ownership and same as borrowers. EMI is being deducted from my husband account as ECS. We both are earning equally. So can both of us avail tax benefits


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