Reducing TDS on salary: How can a married couple split interest and rent on their second home?

Taxation of a jointly owned second home by married couples can be confusing, especially when they are salaried and planning to reduce their TDS on salary by submitting proof of home loan interest and rental income. Today's Q&A explains these in response to a reader's query.

In addition to reporting the salary received during the year, Section 192(2B) of the Income-tax Act, 1961 allows an employee to report any other income to his present employer with details of tax deducted from such income and request the employer to deduct appropriate tax, taking into account such reported other income.

While reporting income under other heads, an employee can report a loss only under the house property head. Except for this loss, no other loss is permitted to be taken into account by the employer for tax deduction.

The employee can report income or loss under the house property head for self-occupied as well as let-out properties. There is no restriction on the number of houses for which such income/loss can be reported. The employee has to submit particulars of rent received and interest paid on the home loan taken.

As per the provisions of income tax laws, a taxpayer is allowed to set off losses under the house property head against other income during the same year up to ₹2 lakh if he opts for the old tax regime. So the employer can take into account a loss of up to ₹2 lakh while deducting tax from the salary of the employee.

Since loss under the house property head is not allowed to be set off against other income under the new tax regime, the employer cannot take into account any loss under the head house property reported by the employee while working out the tax to be deducted in case the employee has opted for the new tax regime.

In respect of a jointly owned house, the deduction is available to the joint holders in the ratio in which they are servicing the home loan, which gets crystallized at the time of purchase of the property and cannot be changed later on. This ratio can be different from the share of ownership. Loss under the house property head for let-out property should be reported by you accordingly. If the employer insists, you may submit an affidavit stating your share in the home loan for this purpose. I do not see any need for agreement for this purpose.

Here's a quick summary of the details shared above: