I had bought a 2 BHK flat in 2010 and have rented it. I closed the home loan associated with it in 2016. I bought another 2 BHK flat in April 2018 and am planning to rent this as well. I stay in a joint family and do not pay or show any rent for the house where I stay. I am currently declaring the income earned from house rent as income from house property (there is no loan on this). When I let out my second flat which has an ongoing home loan, how will my tax calculation work? Can I show the rent received from both the flats as single property income and get deduction benefits from home loan of the second flat on the total rent received?
—Name withheld on request
You will need to compute the income you earn from each flat separately and disclose these separately in your tax return forms.
You are eligible to claim a standard deduction of 30% towards repairs and maintenance costs from the gross rent (annual rental value minus municipal taxes actually paid by you). Also, you can claim a deduction of interest costs on a home loan taken to acquire the property in question.
If the result of this calculation is a loss in respect of one of the properties, such a loss can be offset against positive rental income from other properties held by you during the financial year. If there is still unadjusted house property loss, it can be set off against other income (except capital gains). However, the aggregate net loss arising from all your house properties that can be offset from your other income cannot exceed ₹ 2 lakh per annum. The aggregate loss from house property, if it exceeds ₹ 2 lakh per annum, can be carried forward to be set off against future house property income in the next successive eight financial years .
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Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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