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Income tax exemption (in India) for interest on second home loan

Personal Finance & Money Asked by Padmini Sriram on September 14, 2020

I own a house in Bangalore (India) for which I had earlier taken home loan and which was fully closed nearly 7 years ago. This property has been let out as I am working & staying in Mumbai. I have taken a new home loan in July 2016 for a second property (in Bangalore) which is still under construction. I expect to get possession of the apartment by December 2018. Repayment for this home loan has started in July 2018. Please advise about the tax exemption available under Indian Income Tax rules with respect to the interest applied during the construction period and also the interest applicable after getting possession on the current home loan.

One Answer

If you get the possession before 31 Match 2019, you can claim the interest this year itself.

If you get possession in next FI the interest can't be claimed.

The interest exemption is upto the income generated plus Rs 2 lacs adjusted against income from salary and/or other sources. Excess interest can be adjusted/carried forward for next 8 years.

Say interest is Rs 5 lacs.
Actual rent or notional interest is Rs 2 lacs.
Salary is 8 lacs.

From the Rs 5 lacs interest you adjust against income of Rs 2 lacs. I.e. rent becomes tax free.

From the remaining Rs 3 lacs, you can adjust Rs 2 lacs against salary income. So taxable salary comes down to Rs 6 lacs

The balance Rs 1 lac interest you can carry forward to next 8 years.

Answered by Dheer on September 14, 2020

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