HT Estates - - HTESTATES - Harsh Roongta

I took a home loan for a self-oc­cu­pied prop­erty and an­other house with a sec­ond loan. My sec­ond home is cur­rently under con­struc­tion and pos­ses­sion of the house is ex­pected by Fe­bru­ary 2015. How can I claim tax ben­e­fit for the sec­ond house, es­pe­cially the in­ter­est paid dur­ing the year?

—Sohrab Shah A bor­rower can get tax de­duc­tion ben­e­fit on home loan for an under-con­struc­tion prop­erty only from the fi­nan­cial year in which the con­struc­tion is com­pleted ir­re­spec­tive of whether it is pre-EMI or EMI on part pay­ment. The in­ter­est paid dur­ing the con­struc­tion pe­riod will be al­lowed for five equal in­stall­ments be­gin­ning from the year in which the con­struc­tion is com­pleted and pos­ses­sion taken.

Any pay­ment of prin­ci­pal dur­ing the year in which the prop­erty re­mains under con- struc­tion is lost for­ever.

Se­condly, when a per­son owns more than one prop­erty and both are ei­ther oc­cu­pied by self or his rel­a­tives, the per­son has to treat one of the prop­er­ties as self-oc­cu­pied. Once a par­tic­u­lar prop­erty is opted as self-oc­cu­pied the other prop­erty will be deemed to have been let out. A no­tional in­come equiv­a­lent to the rent ex­pected to be re­alised on such prop­erty will be treated as rental in­come in re­spect of the other prop­erty.

The an­nual value of the prop­erty treated as self-oc­cu­pied is taken at nil and a per­son is en­ti­tled to claim in­ter­est pay­ment for loan taken to ac­quire that prop­erty up to a limit of ₹ 2,00,000. The tax­able in­come of the sec­ond prop­erty will be ar­rived at by de­duct­ing ac­tual in­ter­est payable in re­spect of such prop­erty with­out any limit from the no­tional rent taken above, as well as 30% stan­dard de­duc­tion on the no­tional rent of­fered for tax. In re­spect to both the prop­er­ties you can also claim in­come tax ben­e­fit to­wards re­pay­ment of hous­ing loan within over­all limit of ₹ 150,000 under Section 80 C. You will be able to claim the in­ter­est on the sec­ond house be­gin­ning from the year in which con­struc­tion of the house is com­pleted.

Please note that own­ing two prop­er­ties can have wealth tax im­pli­ca­tions if nei­ther prop­erty is rented out. So con­sult your per­sonal tax ad­viser.

I am a state gov­ern­ment em­ployee with an ap­prox­i­mate net monthly in­come of ₹ 22,250 per month. Can I take a home loan and what would be my el­i­gi­ble loan amount?

— Sah­buri Sen As a thumb rule, if you are below 40 years, you should be el­i­gi­ble for around four times your net an­nual in­come, but sub­ject to a max­i­mum of 90% of the agree­ment value for loan amount below ₹ 20 lakh as a home loan for a ten­ure of 20 years. Your EMI along with any other ex­ist­ing loan re­pay­ments should not nor­mally ex­ceed 40-45% of your net monthly in­come.

You should be el­i­gi­ble for ap­prox­i­mately ₹ 9 lakh at the rate of 10.15% for a 20-year loan ten­ure. You can also en­hance your el­i­gi­bil­ity by mak­ing your earn­ing spouse/ par­ents to join you as a cobor­rower. The el­i­gi­bil­ity will also get im­pacted as you age. the re­pay­ment pe­riod can­not ex­ceed be­yond your re­tire­ment age.

Harsh Roongta is director, Apna Paisa. He can be reached at ceo@ap­na­

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