Benefit of interest on house loan

[Andrew Antonio Fernandez]

I had availed of a housing loan jointly with my wife and are staying in it the so constructed house. But the tax benefits were claimed only by me till now. The loan is nearly over and we now plan to take another loan in my wife's name alone for purchasing another house. This we plan to give on rent. Will she be entitled to any income tax benefit on the loan repayment/interest or on the house rent income?

[Rama Krishana]

Each of the spouse are entitled to own a house property. One house property is allowed to be exempted as self occupied. It is not clear from your query that existing house is in the name of wife or husband. But, since, the loan was being paid by the husband, I am assuming that the house is in the name of husband only. In such circumstances, I believe that wife can purchase a new house and entitled to get the tax benefits as well. Since you are intended to give the new property on rent, you shall be entitled to deduct the portion of Interest full without any restriction i.e. Rs. 1,50,000/- from the income earned from renting.

AI Summary

Interest deduction on housing loan: spouse buying a let out house can deduct loan interest against rental income. Each spouse may hold a separate house property and one house may be treated as self occupied for exemption; where the acquiring spouse takes a loan in her own name and the property is let out, interest on that borrowing is deductible against rental income. Title, occupancy status and the identity of the borrower determine entitlement to exemptions and deductions, and a property purchased and financed solely by the spouse who will rent it qualifies for interest deduction against the rental receipts without the self occupation restriction.