Income Tax Benefit on Mortgage loan

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  1. NageshGP

    NageshGP New Member

    If a person has a property using which raises a mortgage loan and uses these funds to buy another property, does the interest payable on the mortgage loan is tax deductible? If so under which clause and how?

    Also, if the new bought property is let out on rent while staying in the first property itself, what are the income tax benefit propositions? Pls help.

    My understanding is that, there should be a means to avail tax benefits for the interest payable on mortgage loan, as long as it is proved that the same funds has been utilized for buying another home. Pls clarify.
  2. Neha Sharma

    Neha Sharma Active Member

    Dear Nagesh

    The Interest paid on Loan is deductible only if it is a Home Loan. In your case, as it is not a home loan - it wont be deductible.

    Tax on Rent would be computed as follows:-
    Rent Received xxx
    (Less) Municipal Tax Paid (xxx)
    (Less) Standard Deduction @ 30% (xxx)
    jai likes this.
  3. NageshGP

    NageshGP New Member

    Hi Neha,
    Thanks for the response. I think any loan raised to buy/construct/repair a home is home loan. And as such the Sec-24 clause doesn't talk about any type of loan but uses the word just 'capital barrowed'. Pls refer to this link So was just wondering that in this case the mortgage loan raised to buy another property should be tax deductible. Pls confirm.
  4. Neha Sharma

    Neha Sharma Active Member

    Dear Sir

    As per the link shared by you "The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principal amount outstanding under an earlier loan taken for such acquisition or construction"

    So, if the bank certifies that loan was for the purpose of acquisition/construction of a house, you can claim the loan. However, the chances are very less that your banker will certify the same as you have not taken a Home Loan and have taken a Mortgage Loan. At the time of taking the mortgage loan, you dont have to specify the purpose for which the loan has been taken.
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