I have bought a residential property with my wife by taking a joint home loan. I am the only one repaying the loan. We have let out this house. The rental agreement is made in the name of my wife, and the rent is credited to my wife’s bank account. We stay in a rented house, paying ₹15,000 per month. How can I save income tax in this situation?
I am a salaried employee and receive HRA from my employer. It is apparent that the down payment of the house was funded by you, and the EMIs are also being paid by you alone, and therefore, you alone are the beneficial owner of the property.
So the rental agreement and income should have been taken into your bank account, logically. The rental income cannot be taken into her account just because her name is added as a joint owner in the sale agreement. This is patently wrong and not as per the law. Ensure that the rental income is included in your ITR for F.Y. 24-25 and take the rental income into your bank account henceforth.
Against the rental income, you will get a standard deduction of 30% in addition to the interest payment being made for the home loan.
Old Tax Regime vs New Tax Regime Effect
If you opt for the old tax regime, you can claim full interest against rental income, but loss under the house property head is allowed to be set off against other heads of income up to ₹2 lakhs every year, and the unabsorbed loss shall be carried forward for set off in eight subsequent years.
If you opt for the new tax regime, you can claim interest paid on a home loan only to the extent of taxable rent, as the loss under the house property head is not allowed to be set off against other income under the new tax regime. The excess interest can neither be set off during the current year nor can it be carried forward to subsequent years for set off.
As far as availing the benefits in respect of HRA is concerned, this is available only if you opt for the old tax regime. You can claim HRA benefits if you are paying rent for a property which is occupied by you and is not owned by you, even if you own any other house.
Amount of HRA exemption available
The amount of HRA exemption available at a minimum is as per the following points:
- 50% of your basic salary received will be HRA if you are staying in a metro city, else it is 40%.
- Excess of rent paid over 10% of the basic salary
- Amount of actual HRA received.
Without details of your HRA and basic salary, I can not specify the exact amount of HRA exemption available to you.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.