Keeping the house empty is uneconomical, Because under Income tax Act only one house can be treated as self occupied and if second house is vacant then you will have to offer notional income (estimated rental value) as Income and claim deduction of Interest against such notional income. Better option is give it on rent and offer rental income in the hands of both and claim full amount of interest without any ceiling of Rs 1.5 lakhs against rental income i e 50% of interest in the hands of yours and your spouse.
2nd Home Tax Planning
Background: Have one home in my name for which no dues are pending. Bought 2nd home in joint name with my spouse with joint housing loan. We both are employed, with my tax coming under 30% & spouse under 20% bracket. 2nd home may be kept empty or put up for rent (8k per month rent). Current Loan Interest component is about 3L per year. Query: Can my spouse show the home as her 1st home & claim both interest/principle exemption? As the interest component is 3L, should I show it as my 2nd home and claim interest benefit? Can my spouse show it as 1st home and me as 2nd home to claim benefit? Which option will be the best for tax planning?
Asked 9 years ago in Income Tax
Firstly since the first home is in your name your wife cannot show the same as her home and claim both interest and principle.
Secondly in case of second house you can show notional income as per Income Tax Act and claim 50% interest in your account and also 50% in yours wife account as it is a joint property to get maximum claim.
As per IT if you possess 2 house one house can be showed as self occupied and second as rented with notional rent if it is vacant.
No, for interest benefit your wife cannot show first house as her as it is in your name and you can claim only 50%
interest from the notional rent as it is in joint name. This is our view and suggestion to avoid any future complications from the department.
Thanks for the helpful tips. Additionally, can I claim the Pre-EMI tax benefit on the second home as well? If yes, how and under which section?
Asked 9 years ago
You can claim Pre EMI.
Interest upto date of obtaining possession, pre emi or post emi will be allowed as deduction in 5 yearly equal instalment.
Ask a Chartered Accountant
Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
Ask a CA