Rs 2 lakh tax benefit on second house

New Delhi, February 2

Tax benefit on loan repayment of second house will be restricted to Rs 2 lakh per annum, Finance Bill 2017 has proposed, a move that may hit hard those making big savings so far.

As per the proposal, the owner can set off loss towards the second home against other heads of income up to Rs 2 lakh under Section 71 of the Income Tax Act. Under the present dispensation, there is no such limit for set-off of loss from house property, which is mainly the difference between the rental income and interest on home loan. In other words, a buyer could deduct the entire net interest paid on the home loan.

“The Finance Bill, 2017 proposes to restrict such set-off of house property loss to Rs 200,000 per annum only. Balance loss, if any, will be carried forward to be set off against house property income of the subsequent eight years. Hence, individual taxpayers having loss of more than Rs 2,00,000 will now have a higher tax outgo,” KPMG partner Parizad Sirwalla said.

“In line with the international best practices, it is proposed to insert sub-section (3A) in the said section to provide that set-off of loss under the head ‘Income from house property’ against any other head of income shall be restricted to Rs 2 lakh for any assessment year. “However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent years in accordance with the existing provisions of the Act,” the Finance Bill 2017 said.

Till now, individuals who had let out property could set off the loss from housing property against their salary or other income, without upper limit. Such individuals will be allowed to carry forward the losses not claimed for up to eight subsequent years, but the immediate relief will be capped at Rs 2 lakh, Kuldip Kumar, Partner and Leader, Personal Tax, PwC India said. — PTI