Tax benefit on multiple home loan

Hi, My question is regarding change in the budget 2017 for tax benefit on Housing Loan.

I have 2 housing loan for 2 properties. I paid Principle of 54702/- and Interest of 178181/- on the self occupied property and Principle of 78686 and Interest of 250600/- on Let-Out property for the current financial year 2017-18. For the sake of simplecity, let us assume there is no rental income and property tax on the let-out property. So my questions are:-

1. Shall I get tax benefit on Interest for only upto 2 lakhs (putting together both the properties) OR I will get tax benefit for 178181+200000 (benefit capped at 2 lakh for Let-out property).
2. If I am getting tax benefit of only 2 lakhs (putting together both the properties) then can I carry forward the balance unadjusted loss of 228781 (i.e. 250600+178181-200000) for next 8 years
3. Suppose I carry forward the unadjusted losses of 228781 and I sell one of the property next year on which I make a Long Term Capital Gain of say 400000/-, so can I adjust my accumulated unadjusted losses of 228781 against the Capital Gain and pay the Capital Gain tax only on the remaining capital gain

Regards,
Mahesh
Asked 12 days ago in Income Tax from Bangalore, Karnataka
1) The limit of Rs 2 Lakhs is applicable on self occupied property and there is no limit on interest on loan in respect of let out properties. Thus you can claim the entire interest of Rs 1,78,181/- on the self occupied property and Rs 2,50,600/- on let out property, aggregating to Rs. 4,28,781/-
2) The issue does not arise, as you are able to claim the entire interest.
3) This issue also does not arise,as you are able to claim the entire interest. Assuming that you don't have any other income and this is the only you have, the loss under the head income from house property can be carried forward and adjusted against income from house property only and not under any other head of income.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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Dear Mahesh,

The newly introduced cap of 2 lacs is not for interest deduction. the cap for interest deduction remains same as it was earlier (i.e. no restriction of interest deduction on the let out property).

The newly introduced provisions restrict your house property loss to INR 2 lacs. Income from all the house properties put together (i.e. rent minus all interest deductions) cannot exceeds 2 lacs.
 
Please feel free to call/ revert in case you need more clarity.

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
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Yes from the FY 2017-18, there is a cap on allowance of interest on housing loan even for let out property. The workings given by me earlier were for Asst year 2017-18 and not FY 2017-18.  Thanks for correcting me.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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Hi Mahesh

The interest deductions shall be available. The limit of Rs. 2 lacs is on house property loss and not on interest deductions. You would not be having a house property loss since rents would be deducted by 2.5 lacs interest to result in house property income ( I assume rents would be more than 2.5 lacs).
Lakshita Bhandari
CA, Mumbai
700 Answers
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Hello,

No matter the number of properties you own, the deduction of Rs.200,000/- will be capped per assessee. You will not be in a position to carry forward the deduction to set off against future profits.

So to cut things short, you can claim only Rs.200,000/- as a deduction, no matter the number of properties you own.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Rohit R Sharma
CA, Mumbai
1900 Answers
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Hi,

The document circulated by your company is based on the recent circular issued by the CBDT on 5 December 2017. As per the recent amendments:

1. Interest on Loan:
The limit of Rs. 2 lakh is only on self-occupied properties. There is no limit on the interest on loan paid on let-out properties. This is as per section 24 of the Income-tax Act, 1961 a read with section 23(2) of the Act.

2. Limit on set-off of losses:
However, though the interest on let-out property is not capped at Rs. 2 lakhs, they have capped the amount of loss that can be set off against income earned from other heads. Relevant sections are section 71 and 71B of the Act.

For example, say your rental income is Rs. 9 lakhs and the interest paid is Rs. 5 lakhs. You will get deduction of the entire interest paid and the differential amount will be taxed as income from house property.
Alternatively, if the rental income is Rs. 3 lakhs and the interest paid is Rs. 7 lakhs, the net income from house property will be a loss of Rs. 4 lakhs. Suppose you have salary income of Rs. 10 lakhs, you can reduce the entire Rs. 4 lakhs loss against it, you can deduct only Rs. 2 lakhs and your net taxable income will be Rs. 8 lakhs (10 lakhs - 2 lakhs).

Trust the above clarifies.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
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In your example, 

1. You will get benefit of interest on self-occupied property of Rs. 178181 and on let-out property of Rs. 250600.
2. You can claim benefit of loss of house property of Rs. 2 lakhs. The remaining Rs. 28781 will be carried forward.
3. You cannot set off loss from house property from an earlier year against the capital gain of the current year. The brought forward house property loss can be set off against house property income only.
Keerthiga Padmanabhan
CA, Greater Mumbai
688 Answers
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