I have 3 house properties. How to calculate tax on income from them

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Question: I have 3 house properties. One house is self-occupied; 2nd one was let out @ 24000 per month for 4 months. The third one is occupied by my parents. I have taken a housing loan for the 3rd house and am paying EMI. Interest on home loan is Rs. 2,40,000 per annum (approx.) How do I compute my income from house property? Can I claim home loan interest of one house against another house’s Income?

Answer: As per the income tax laws a person can have maximum of two self-owned houses as self-occupied. In case the tax payer has more than two self-owned houses as self-occupied, he has to select any two of the house as self-occupied and treat the other house/s as deemed to have been let out. Any house occupied by relatives on which no rent is received can be treated as self-occupied so you can claim the first and third house as self-occupied.

For a house property which is let out either during the year or even in the past, you get vacancy allowance for the period for which the property could not be let out. So in respect of the second house you need to offer the rent for four months only for which it was actually let out.

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In respect of all the properties treated as self-occupied, you are allowed to claim interest for money borrowed for such house only upto Rs. 2 lakhs in a year. So you can claim interest only upto Rs. 2 lakhs on home loan for the third house and the excess of Rs. 40,000/- will have to be ignored. Had the third house been let out, you would have been able to claim full interest against the rental income of this house. In case the loss under the house property head for all the properties taken together exceeds two lakhs rupees in a year, you are allowed to set off only two lakhs of loss against other income during the year and the loss not so set off is allowed to be carried forward for eight years for being set off against house property income.

Strictly speaking you cannot claim interest paid in respect of one house against rental income of other house but you can set off income of one house property against loss of another property.

Balwant Jain is a tax and investment expert and can be reached on [email protected]

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