Hi,
Your company is absolutely correct. There is a provision which restricts house property loss to be Max. 2 lacs.
Reamaining loss can be carried forward in next year's.
Pre EMI interest tax relief in my case
For FY 2017-18, how much interest can I claim Let out property Property bought and Loan sanction date: 12th Apr 2014 Possession date: 1st Feb 2018 Notional rent Feb Mar 2018 = 10000 Pre EMI interest (from Apr 2014 to Mar 2017) = 530525 Interest from Apr 2017 to Mar 2018 = 185538 As per my understanding the pre-EMI interest will be divided into 5 parts and hence each year it would be around 106105 this added to the current year interest = 185538 + 106105 = 291643 I will deduct notional rent - 30% sundry = 7000 By deducting this from interest = 291643 - 7000 = 284643 Can I claim the full 284643 as interest / losses, but my company has considered 200000 and not the full 284643 amount, why ? They say there is a new IT provision which caps this at 200000. Can you please help ?
Asked 7 years ago in Income Tax
Hi,
In case of a let out or a deemed to be let out property, the entire interest is allowed as deduction under section 24 till Financial Year 2016-17. From Financial Year 2017-18 deduction for interest on let out property is allowed upto Rs 2 Lakhs. So what your company has considered is correct.
The maximum cap is Rs. 2 lakhs now.
Regards,
Nikhil.
Yes the company is correct. The maximum deduction allowable is 200000 aa interest.
Dear Sir,
From F.Y. 2017-18, maximum deduction allowed as interest is restricted to Rs. 2 lacs only.
Thanks
Hi
Your calculation of interest deduction is correct. However, only Rs. 2 lac can be set off in this year and the remaining 84643 shall be carried forward.
if it is self occupied house, Interest cap is Rs 2,00,000/-.There is no any cap for Let out Property.
Further, from financial year 2017-18 the cap of Rs 2,00,000/- is made applicable for set off of loss from house property from other head of income and remaining loss can be carried forward to next 8 years and to be set off in next 8 years.
in your case i could not understand that property is let out or self occupied as you have stated notional rent income of Rs 7000 for annum only.
Thank you friends for the clarification That means, the pre EMI interest is now of no use My house is let out, and the yearly interest will be more than 2 lacs from the coming year With the 2lacs interest cap, there is absolutely no provision for using the pre EMI interest 2 questions: 1) is there a way, I can claim relief on the pre EMI interest ? on some other avenues, to decrease tax burden ? 2) what would be a beneficial situation (for tax), to occupy the house or keep it let out In which case, I would have the most tax deductible amount ? If there is not a major difference, I will rather stay in rented house and sell this house after 2 yrs and reinvest in another property my gross income is 25 lacs I stay in a rented house 2bhk and pay 30000 per month (thane) My current HRA is 40000 per month, so sec VI deduction around 240000 My loan EMI is 28000 (for a loan of 30 lacs, I have already paid around 8 lacs and 22 lacs remaining) For my let out property (thane 1 bhk), expected rent is 12000 per month P.S. If I sell this now (got possession a month back) and still reinvest the gains in another house (2bhk) for self occupancy, will the short term gains be taxed, I know tax will be applicable (holding period < 2 yrs), but somehow my mind says since it took so long for me to get the possession, the tax dept may be lenient, as such I will reinvest the gains in another property for self occupancy Purchase price 44 lacs, current price 85 lacs
Asked 7 years ago
1. No tax relief as of now. But you can consider such interest as part of cost of acquisition when you'll be selling this property.
2. For your case, interest deduction will be same in both cases. But, considering rental income addition, it will be beneficial not to let out the property.
When did you receive letter of allotment? The period of holding of 2 years shall be counted from date of allotment.
Hi,
1. Yes, you can claim pre emi interest if any given year your interest pay out is less than 2.84 lacs (considering the rent if 10k per month).
2. Considering your situation there won't be much difference.
3. Yes, you can claim the exemption from capital gain if you re-invest in another residential property, since your purchase date will be considered as date of allotment which is in 2014 (pls confirm this)
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
1. Unfortunately right now there is no avenue to save taxes. However. In the next 5 years you may be able to take this benefit if your interest burden for the year falls below the threshold.
2. Right now it would be beneficial not to rent the property since the rental income will get added to your income but you will not be able to take the interest deduction benefit.
3. If you sell it within a period of 2 years, it will become taxable. I dont think you should expect any special leniency.????
Regards,
Nikhil.
Dear Sir,
If the location of the HP is in the same city where you are working, keeping it vacant will be of no use and you will loose the HRA exemption benefit.
If it is in different city it is better to let it out, earn some rent, claim benefit of Rs. 2 lcas and carry forward the balance loss in next years and claim the benefit in the subsequent years.
OR
Capitalise the cost of interest and take benefit while computing capital gain.
Date of letter of allotment will determine the nature of STCG or LTCG. Assuming you got letter of allotment in 2014-15, capital gain would be Rs.35 lacs.
Thanks
Thank you very much for your kind answers I have rented out the property and not staying despite being in the same city, because it is a 1 bhk and my requirement is for a 2 bhk (big family) As asked by a few of you: regarding the date of allotment - I booked the house during pre-launch by paying 10% in Nov 2013 (not yet constructed) - House was registered with Maharashtra gov and registration document made in Apr 2014 - On the registration document, date of possession mentioned was Mar 2016 - SBI Bank loan sanctioned in Apr 2014 based on registration document - Got delayed and missed the Mar 2016 possession - Finally received possession and OC in Feb 2018 Hence, when is the date from when the countdown for 2 yrs holding period starts - Is it from Apr 2014 when registration done and bank loan approved - or is it from Feb 2018 when I received OC and possession I am not sure, how is the holding period for under construction house is calculated If it is Apr 2014, when registration happened, then I have exceeded the 2 yrs holding period, right ? I can sell the property now, look for a new one, add pre EMI as cost of acquisition and pay no tax on the capital gains If the holding period starts now (Feb 2018) from the date of possession / OC, then I can do nothing but wait ... Thank you very much
Asked 7 years ago
Period of holding starts from the date of allotment and not date of completion or possession. So your property is already in long term bracket. You can very well sell it and invest in another house property to claim 54 exemption.
Interest cap is for 2 lacs .
Dear Sir,
Is the words "letter of allotment" mentioned on the document given to you by builder in April 2014 or not? If it is written then April 2014 otherwise Feb.2018.
Thanks
It will be Feb 2018 as date of possession is important.
Regards,
Nikhil.
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