Home Loans and Income Tax Benefits – Part 2

In this article I will be writing about the home loans and the calculation involved in the interest repayment. In my previous article titled Home Loans and Tax Benefits explains about what are the tax benefits while taking the home loans. But, it doesn’t write much about the interest repayment and the different scenarios while owning the multiple houses. This article intend to teach you how to utilize the interest repayment on home loans when you have many properties and have rented out few houses. I would like to hear feedback from you, Please post it in the comments section. If you like the article, please get free email updates.

Articles on Home Loans

In our blog I have published home loans related articles in the past. It would be nice if you have read those articles to gain more knowledge on the home loans and tax benefits.


  1. Home Loans and Tax Benefits
  2. Tax Benefits on Home Improvement Loans
  3. What is Home Loans Top Up?
  4. Information on Home Loans

Home Loans and HRA


Many people confuse that if you have the home loans then you are not eligible for the HRA deduction from the income. That is not the correct opinion, in many case people buy the house and for some reason they will stay in the rented property. In that case they are eligible for the HRA exemption. The exemption of HRA is covered under Section 10 (13A). The following conditions are needed to allow the HRA exemption:

  • The rent must be actually paid by assessee.
  • The rented property is not owned by the assessee. The section does not enforce any rules if the assessee owns any other property. So, that is irrelevant to the case.
  • Principal portion of the home loans will not affect in any way to the HRA or interest payable.

Home Loans and Interest Payment

  1. Here I will be writing about the various scenarios involved in interest paid on home loans. There may be scenarios where one person owns many properties with different city. This section will explain you with example of how to calculate the tax benefits on that scenario.
  2. If the person self occupied the property, then it is direct deduct from the income. For example a person paid Rs.120000 for interest on home loans. His total income is Rs.400000. Then his taxable income is Rs.400000-Rs.120000=Rs.280000. (Other tax deductions will be added). There is upper limit of Rs.150000 as interest payable if the property is self occupied. The limit is applicable for the person owns multiple home loans for more than one property, if the property is self occupied.
  3. If the property is rented out, then the annual value (income as rent) will be calculated for that property. The formula will be like this:Annual Value (Rental Income) – 30% as the standard deduction – Interest Payable on home loans = Income from house property.
  4. In the above scenario, income from house property can be negative when the interest payable is more that rent received. In such scenarios the loss will be deducted from the total income. For the rented property there is no limit on the interest payment. For example, the total rent received in particular year is Ra.100000. the same year interest paid on home loans is Rs.300000. Then Rs.200000 (300000-100000) can be deducted from the total income. This calculation is for the rented property.
  5. If the property is vacant, not rented out and also not self occupied. The you will have to calculate the rental value based on the market and location of the property. That notional vale will be used for the calculation.
  6. There is nothing in the section that affects the exemption of HRA at all. Also, there are no conditions that restrict the availability of deduction of interest based on the assessee’s stay in any other premises.

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I have written many in depth details about the interest payment on home loans. This would be sufficient for the tax deduction and post your comments if you have any doubts. I will be happy to answer all your questions. If I have missed out any of the points, will come up with another article explaining the home loans and benefits. Thank you for reading the article.

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  1. Rahul says

    I have a query,
    I am staying in Mumbai in a owned home bought on loan. I am claiming Interest exemption of 1.5 Lakhs on this & the corresponding principal in 80 CCC.
    I bought a 2nd home in Mumbai on loan, which I will take possession by March 2012. Can I declare a notional / actual Rent income & claim the interest paid of 1.2 L , over and above the 1.5 L I claim on 1st home.

    Rahul Nisal

    • Kartik Padmanabhan says

      Yes you can. The net benefit that u will get will be calc as follows:
      150000+{120000-[annual notional rent-30% of the annual notional rent]- muncipal taxes paid on second property during the yr}

  2. Sameer says

    I have one question regarding home loan and tax exemption.
    I took a loan to procure land and construct a house on it in OCT 2010.
    Can i avail tax benefits for repayment of principal and interest?
    I have not yet started the construction of the house.

    Thanks !

  3. Jigar Mehta says

    Hi Gurus,
    I have a query, and need to prompt attention
    I have selected a property in Pune and have to pay 20% as initial payment.(including tax)
    I heard that if in case same amount(20%) transfers from parents account to my account then it will be treated as gift from my parents to me.In that case builder will not be eligible to take tax amount for that 20%
    Just want your confirmation on this and if possible please ellobrate also.

  4. shailesh srivastava says

    Hi krishna
    read all articles of yours, very interesting and informative.
    Kindly solve my query:
    I live in bharuch in 1st house in my name on which loan is on as principal/interest as 2,50,000/50,000
    I have 2nd home in my name on which loan is on as princpal/interest as 60,000/1,00,000 but it rented out on 1,08,000 per year
    1) can i show show 2nd home as self occupied and rent amount for 1st home property income
    2) if not, what if loan on 1st proprty gets over, then can i show 2nd house as self occupied if actually rented out?

  5. Anuradha says

    Hello Krishna,

    Very informative article and blog , it clears a lot of queries. But I am presenting a typical situation here . Kindly help.

    We have constructed a house with 3 floors . We are staying on ground floor with the other 2 floors on rent . The rent exceeds the Interest component .
    We have taken the loan for construction . How will the interest component for Tax exemption be calculated.

  6. psahoo says

    I have the PF which is more than 1 lakh so it will take care of the 1 lakh exception we have.

    apart from this can i claim tax exception on my housing loan(self occupied) interest up to 1.5 lakh + principal up to 1 lakh.= total 2.5 lakhs apart from the regular 1 lakh what we have for men related to pf, investments etc under 80c.

  7. Akshay says


    I have constructed a house at my home town & my parents are staying there. I am staying in a different city. Please tell me if its possible to cliam exemption for both HRA & housing loan interest payment & how?

  8. Rashi says

    Hi Krishna,

    I have been staying in a rented apartment from April to December. Can I claim interest part for the whole year or it will be claimable only for Jan-March?

    I also wanted to know if pre occupation interest part is within 150,000 Rs limit or is it over 150,000?


  9. lax says

    Hi Krishna,

    Nice article, I took home loan from Andhra Bank, asked for provisional certificate they in-turn asked for sample or draft or template of it, can you send me a draft or sample of it. That will help me a lot.


  10. Jigar says


    I have 2 home Loans in Virar,Thane and i currently live in Goregaon(Mumbai). Both Home Loans are in ready possesion and not rented out.
    1st Loan
    Principal:- 20,000/-
    Interest is 1,00,000/-
    2nd Loan
    Principal:- 20,000/-
    Interest is 1,78,000/-

    How much i can claim in 24 C and can i still opt to show an HRA?

  11. Kariyan says

    3 colleagues want to buy a house plot and construct 3 storied house in Bangalore.
    Can this plan will be approved by govt authorities?
    Can we get loans from Bank for constructing house?

  12. Narendra says

    Can brothers (2) claim the interest rebate of 1.5 lakhs each for a property bought with equal share or its 1.5 lakhs in combine for tax exemption..

    thanks for help

  13. Rattan Kumar. R says

    My self-occupied house constructed through Bank Loan is jointly owned by self and wife. Both of us are Govt. Servants. Is it permissible that only one of us claim 100% income tax benefit as far as interest and principal on the housing loan are concerned ? Kindly quote the relevant Income Tax Rule/Section which can be quoted if such a benefit is permissible ? Is there a Rule that if the house jointly owned and the loan is also jointly availed only 50% each of income tax can be claimed separately by husband and wife ?


  14. vilas says

    i booked the property in Boisar which is under Thane Dist.
    in august 11 and Agreement Done in January 2012 and
    possession is pending???

    At that time Builder told me
    their is no Service tax!!!!!!
    Because GOVT given stay order on Service Tax and VAT

    But in last week Builder said i have to pay Service Tax
    As per my agreement value
    so i am liable to pay of 33000/-

    So my qurestion is that is that necessary to make the payment of Service TAx
    as per new law
    and i also i got the inforamtion from my friend

    this law is not yet to passed but this Amt will keep in Fixed Deposit
    and this amt may return in future if the law is not passed

    So i am confused what to do in this situation

    plz suggest me what shall i do ?

  15. ARUN says



  16. Praveen Sharma says


    Could any one let me know, whether Housing loan provisional certificate and Housing loan EMI Schedule document are one and the same? Can I claim that EMI schedule document for tax benefit?
    I need to submit the documents before FEB-15-2011. Your quick replay is much appreciated!!

    Thanks in advance!!
    Praveen Sharma

  17. Pradeep Kumar says

    Please quote the rule or provision based on which you have stated that there is no limit on the deduction of interest on Housing loan taken for a house property, except that it should not exceed the actual rent received.

  18. Pradeep Kumar says

    Subsequent to my last query about the rule which allows us to deduct more than Rs.1.5 lakhs from the rental income, though I haven’t seen the rule the ITR form under schedule HP says”cannot exceed 1.5 lacs if not let out”. May be it can be taken as an authorisation to exceed 1.5 lac if let out.

    However still it’s unclear whether it has to be limited to the actual rent received. Can the income from house property not be in “negative”?

    Thanks in anticipation

    Pradeep Kumar

  19. Vishnu Sable says

    Very Nice, informative and Profitable article. Thanks.

    Iam owning a second house and paying interest of 5 lacs & gaining rent of 1 lac. The principle amount is 40000.
    After knowing the fact of tax benefit by owning a second house and renting it out, Iam unable to take the benefit as my office is not cooperating for such cases and the office continues to cut TDS with regular benefit of 150000 (Int) + 40000 (Pri) only.

    Can you please guide me as to how I can claim this paid interest throughout the year ?

    kindly correct for my calculations as follows,

    100000 (rent) – 30000 (Std Dedn) – 500000 (Int) + 150000 (TDS) – 40000 (Prin) = -320000/-

    Now at the end of this finalcial year how can I produce my case to IT department, do I have to take help of CA etc.

  20. kamal says

    The House Interest is 1.5Lakh is limited for Self occupied. But for Rented out we can show upto maximum.

    Self occpied person will lost HRA and interest benefits at the time of Tax submission.

    This is the govt Law….

  21. Vineeth krishna says

    Hi. I am Vineeth krishna and 22yrs old. I am working for a package of 4.5lakhs and purchased a flat for 14 Lakhs. The loan amount i took from the bank is 10lakhs. My EMI to the bank at present is Rs.10157/-. The loan period is for 16 to 20 years. Please let me know what is the amount which i can declare to avoid deduction of tax with this loan amount.I am seriouslly confused with this tax system.
    Please someone suggest me. I live in a rented house and my flat is still vacanat.


  22. deepak mathur says

    Hi , i have taken home loan for construction purpose from HDFC BANK. The property owner is my mother and i m paying the loan amount . so can i get income tax rebate.?

  23. deepak mathur says

    Hi , i have taken home loan for construction purpose from SBI BANK. The property owner is my mother and i m paying the loan amount . so can i get income tax rebate.?

    PLZ REPLY………….

  24. Kartik says

    Mr Krishna: A well maintained and informative blog, pls accept my compliments.Could you pls advice me on the following. I have 2 flats: No1 flat was taken posession of in 2007 and regd jointly with my wife.Loan is taken jointly.Status of this flat is self occupied. Till last FY my wife was not working so I was claiming 100% benefit on int as well as principal component.In FY 11-12, she has begun to work and contributing towards EMI Can she take benefit of int and principal component in the ratio in which she is contributing from this AY onwards?

    Ques no 2: Posession of my second flat was taken on 30 Mar 2012. Since I am showing the first flat as self occupied, the 2nd one will be deemed to be genr income as per IT rules.My ques is that since I have taken posession only on 30 Mar : what is the deemed income that i should show? Will the flat be deemed to have genr income for only one day or will it deemed to have genr income for the entire year despite my having had posession of it for only one day in that year?

    • says


      1. Yes. She can claim the tax benefits if she is also the owner of house.
      2. Only one day. You have to show the total income from that flat a year, so in your case its only one day.


  25. says

    Undeniably believe that which you said. Your favorite justification appeared to be
    on the web the simplest thing to be aware of. I say to you,
    I certainly get irked while people consider worries that they just do not know about.

    You managed to hit the nail upon the top and defined out the whole thing without having side-effects , people could take a signal.
    Will likely be back to get more. Thanks


  1. […] This process is very normal and everyone is aware of this term. But, there is another term pre-EMI, that is very less known to the people. In the next section we will look into that in details. Pre-EMI is one of the important fact which every buyer should know before applying for the loan when the building construction is not yet completed. After reading this article please talk to nearby banker to know more about the Pre-EMI and its advantages. The process for Pre-EMI can be different from each bank. Home Loans and Income Tax Benefits […]

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