Income Tax query answered…

I constructed a house in Nellore where my parents live and I bought an apartment in Bengaluru where I live. Both these properties had home loans. To get higher tax relief, I have shown my Bengaluru home as “deemed let out” property and the one in Nellore as “self occupied”. I have paid off my home loan on my Bengaluru home now and want to know if I can show my Nellore property as “deemed let out”.

Krishna Kishore

When an individual owns more than one residential property that are used for his/her own residential purpose, any one residential property at the discretion of the individual can be considered as self-occupied property (SOP) and the other as “deemed let out property” (DLOP). For the said DLOP, the deemed rent is liable to tax.

An individual can claim tax deduction towards the actual municipal taxes paid and standard deduction of flat 30 per cent (after deduction of municipal taxes) towards repairs and maintenance charges against the deemed rent.

The entire interest on housing loan can be claimed for tax deduction against the net rental value.

The balance rent amount, if any, will be taxable as “income from house property”. Additionally, one can claim deduction towards repayment of the principal portion of housing loan subject to overall cap of ₹1.5 lakh per financial year under Section 80C of the Income Tax Act, 1961.

In your case, you can choose to consider the Bengaluru property as SOP and the Nellore one as DLOP and claim the allowed tax deductions. There is no other requirement to formally communicate the same to the tax department.

Credits The Hindu Business Line

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