HRA and interest deduction from 2 properties

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  1. InvestorDel

    InvestorDel New Member

    I rent in a city and claim HRA. I am planning on buying 2 flats in different city or in the same city but 20KM away from where I work. The 2 flats are for investment purposes.
    Can someone clarify if:
    1. I can claim 100% deduction of interest on Flat 1 and Flat 2 in the different city ? All 3 properties are NOT owner occupied. I am assuming I continue to get HRA in all cases.
    2. If I buy in the same city- what is the exact definition(how many KM from work or time to work ?) where i can claim HRA as well as interest deduction on the 2 flats?
    3. I am assuming the max of 1.5Lacks interest does not apply here as I am not occupying the 2 flats and am renting. More over the 2 flats will either be in another city or in the same city as my HRA house but far enough that I cannot commute to work each day if I lived in any of the 2 flats.
    4. The interest deduction on loans for the 2 flats- I am assuming they will only allow after I take possession(say in 2 yrs) but I can accrue the interest and deduct against my regular income from Job in the subsequent years.
    5. Is it beneficial then to take ready to occupy flats so I can deduct interest right away ?
    6. If I take on the 2 flats and say my interest payment is Rs40 Lacks per year and the rental value is Rs5L (assuming i have possession). Will I be able to write off Rs35L against my annual salary which is say Rs30L ?

    Thank you.
  2. CA keshav Agarwal

    CA keshav Agarwal New Member


    1) First the thing is that you can claim Both HRA and Interest paid on House loan because both home loan and HRA are two separate things and have no direct bearing on each other.
    2)To claim 100% Interest Deduction on House loan house should be rented out otherwise only Rs1,50,000 of Interest is allowed as deduction for single house.
    3)Interest paid before possession (Pre Possession interest ) can be claimed after getting the possession in next 5 years equally starting from the year of possession.
    4)Loss under the head House property cannot be set of against salary income.
    5) You can have your own house in the city and still live in a rented house so there is nothing (like How much KM and time to work) still you can claim HRA and Interest seperately.

    For any further Clarification please feel free to write.

    CA keshav Agarwal
  3. Neha Sharma

    Neha Sharma Active Member

  4. CA keshav Agarwal

    CA keshav Agarwal New Member

    Thanks @Neha Sharma for seeing that

    Loss from house property can be set off from salary income.
  5. ankur84

    ankur84 New Member

    Hi ,

    I am working for a company in Gurgaon (Haryana). I am staying in a rented house in haryana which is near to my office. I have two flats(in Ghaziabad & Delhi) for which I have taken home loan.If I am not staying in both the houses and given the ghaziabad property on rent and delhi property is lying vacant and is expected to have tenant in future.,

    1) Can I avail tax benefits on both home loans.I would be more interested in the “interest ” part of both (delhi & Ghaziabad) the loan. (As 1 lac limit for 80C is already consumned by my LIC)
    2) Can I also avail HRA for the Gurgaon house for which I am paying Rs 18,000 per month rent

    I can show rents on both houses as my income and can I get HRA benifit too as I am staying in rented home?

  6. Neha Sharma

    Neha Sharma Active Member

    Dear @ankur84

    1. You can claim deduction for Interest of both the properties.
    2. You can also claim HRA Exemption
    3. Yes, you can show Rent on both houses as your income and get HRA benefits as well
    ankur84 likes this.
  7. ankur84

    ankur84 New Member

    Thnx for your revert.
    My second property which is in Delhi is not leased out , so will I have to take notional rental for the same and then take the earnings (Interest on home loan- annual notional rent received) or I will get the entire interest rebate on the home loan part without taking the notional rent.

  8. Neha Sharma

    Neha Sharma Active Member

    If you are showing notional rent, then there would be no limit on interest rebate... If you are not showing notional rent and assuming it as deemed Self-occupied, in such a case - the interest rebate limit would be Rs. 1.5 Lakhs
    ankur84 likes this.
  9. ankur84

    ankur84 New Member

    I cannot show it self occupied as I am occupying a rented premises in Gurgaon(for which I am paying 15k per month) for which I want to claim HRA??
    So for both the properties(for which I have taken home loan i.e. Ghzbd & Delhi) rebate will be on only interest part of the home loan - actual rent(or notional rent). ??
  10. InvestorDel

    InvestorDel New Member

    Thank you Mr. Keshav and Ms. Neha.

    So if I understand you correctly:

    1. I can continue to get HRA per norms. In addition invest in 2 properties(flats) in the same city as the HRA rented accommodation. So, I can write off HRA + 1.5L from first flat (I will be taking loan) and say 10L from second Flat. So total deduction I can get is HRA+1.5L+10L against my income say of 20L.
    2. The 2 flats will get constructed and possession will be only after 3 years- so the 1.5L+10L per year can accrue till possession (11.5Lx 3 yrs = 34.5L). In 4th year after possession, i can take 1/5th of 34.5L interest deduction(Rs6.9L) against my annual income of say Rs20L. In addition the 11.5L for 4th year + HRA (assume Rs 1 L) can be deducted. So my net taxable income in 4th year will be 20L- 6.9-11.5 - 1 = 0.6 L only ?

    Please confirm my understanding.

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