How the income/loss for the 2nd house are treated for FY2017-18, while the interest paid towards the 1st house being claimed is already up to 2Lakhs? I pay interest for the housing loan on 2nd House, which is rented out. The loss from the 2nd house(let out property) is more than 2lakhs. I do claim the tax exemption on interest paid towards housing loan - to the its maximum limit of 2 Lakhs, for my 1st house where I reside.
Deduction of housing loan interest is available separately for each house. You can claim deduction upto Rs.2 lacs on second rented house. If the interest amount is more than Rs.2 lacs, balance will be carried forward to next year.
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My company payroll team insists that the ceiling of 2lacs - both Self occupied & Let out. Can you pl. confirm based on Section 24(b) & Section 71? Also, payroll argument is that Section 71 to be applied after the section 24(b) and hence the ceiling of 2 lacs - for both self occupied & let out.
Hi,
Total loss from house property head, taking both the properties into consideration, cannot exceed INR 2 lacs. Loss over and above 2 lacs shall be carried forward to next year.
Yes as per section 71, total loss of Rs.2 lacs can be carried forward for both the self-occupied and rented property and the balance will be carried forward.
Please ignore my previous reply.
Ok. Two different opinions on same question and that is been the dilemma. Can these opinions be backed up with the appropriate IT sections to justify? Loss from house property for both the properties can not exceed 2 - Lacs, I suppose this is section 71. Where as Section 24(b) is interest paid on housing loan. Can they be independently applied? Also which section of Income tax been considered - in the opinion given by Mr. Vivek Arora and by Mr. Abhishek Dugar?
After application of section 24(b) we need to apply section 71 therefore cumulative interest allowed would be 2 Lacs. This is effective from A.Y. 2018-19 in allignment with international best practice.
Your payroll team's reply is apt.
The backing of my opinion is based on section 24 and 71.
As per 71, house Property loss cannot be set off in excess of 2 lacs.
Hi,
Your payroll team has correctly advised you.The total loss from house property, considering both the properties, cannot exceed 2 lacs. Loss over and above 2 lacs can be carried forward to next year.
Hope that clarifies.
Regards,
Nikhil.
Considering both properties,loss cannot exceed 2 lac.Loss in excess of it can be carried forward.
Maximum interest deduction that can be claimed is Rs 2 lacs as per sec 24 of Income Tax act.
Hi,
Section 24 talks about Computation of Income from House Property. Section 71 is about Set off of loss from one head against income from another. Till FY 2016-17, there was no limit for set off of Loss from House Property. A new sub-section 3A is introduced in Section 71 wef 1-Apr-2018 (i.e from AY 2018-19 which means it's effective from FY 2017-18).
Below is the full text of sub-section 3A of Section 71:
(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.
So, You have to first Compute Income from House Property and then set off loss, if any, up to Rs. 2 Lakh and carry forward the loss exceeding Rs. 2 Lakh up to 8 Assessment Years.
As per Section 71B, this Carried Forward Loss can be set off only against Income from House Property.
As per your query, you have one Self-occupied house and another let-out house.
Loss from self-occupied property is Rs. 2 Lakhs.
Loss from let-out property is Rs. more then 2 Lakhs. For calculation purpose, I assume it at Rs. 3 Lakhs.
So, Total Loss under the Head House Property is Rs. 5 Lakhs.
This means, you can set off Rs. 2 Lakhs against Salary Income in AY 2018-19 (i,e. FY 2017-18) and carry forward the remaining loss i.e Rs. 3 Lakhs to be set off any time up to 8 Assessment Years from AY 2018-19. (i.e from AY 2019-20 to AY 2027-28)
Hi
According to the provisions of section 24, for self occupied property, interest allowability is capped at Rs. 2 lacs. However, there is no limit on let out property.
But, according to section 71, maximum house property loss that can be carried forward is 2 lacs.
So, even if house property loss exceed 2 lacs after set off in current year, only 2 lacs loss can be carried forward.
Also, important to mention, House Property Losses can be set off against profits from other heads. It can be set off against salary income, Business income, Income from capital gain, and income from other sources except casual income.
But, in carry forward of House Property losses, it can be adjusted only against House property Income in the succeeding 8 years.
There is no need for confusion.
The interest on borrowed funds against house property is allowed upto a maximum of Rs 2 Lakhs, irrespective of the fact whether it is let out or self occupied u/s 24 of the Income Tax Act.
In the case of let out property, the interest will be partly or wholly offset against the rental income and the loss under the head "Income from House Property" in such case will generally be less than Rs 2 Lakhs. In the case of self occupied property, the interest on housing loan cannot be set off against income from house property and a loss generally results under this head. The net deficit, i.e., the net income from the let out property and the net loss from the self occupied can be set off against each other. If there is still loss, such loss can be set off against income from other heads of income u/s 71 to the maximum extent of Rs 2 Lakhs.
This is a new provision that has come into effect from the FY 2017-18.
Dear Sir,
Please ignore my previous reply.
1) Interest on loan for self occupied HP is allowed maximum upto Rs.2 lacs.
2) Interest on let out/deemed to be let out HP is allowed irrespective of any amount.
3) Maximum set off interest is allowed Rs.2 lacs.
Thanks