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Home loans and tax benefits if you own multiple homes

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 Although a person can avail of multiple home loans, the tax benefits on the interest
paid on the loan for a second house, are different from that available for the
first house
People are generally under the impression that
one can own any number of properties but one cannot take more than one home
loan at a time. This is not true. As there is no restriction on the number of
properties you can own, there is also no restriction on the number of houses
for which you can take home loans and claim tax benefits. The amount of home
loan that you can take, for all the properties taken together, shall depend on
your earning and your ability to service the loan.
Tax benefit on
interest payment
You can claim deduction for interest payable
on a loan, taken for purchase, construction, repair, or renovation of any
property under Section 24b. In case you own only one residential house property
which is occupied by you, the maximum deduction that can be claimed on interest
repayment on a loan for that property, is restricted to Rs 2 lakhs per annum.
However, in case the money is borrowed after 1st April 1999 and construction of
the property is not completed within a period of three years from the end of
the financial year in which the money was borrowed, the deduction in respect of
the interest claim shall be restricted to Rs 30,000 only.
In case you have let out any property or
properties owned by you, you can claim deduction for the entire interest paid,
without any upper ceiling against the rent received in respect of each such
property. However, in case you own more than one house property and more than
one houses are occupied by you, then, you have to choose any one property as
self-occupied and the other property/properties are treated as let-out for
which a notional rental income, based on the rent the property is expected to
fetch, is required to be offered for taxation. So, once any such property is
treated as let-out, you can claim the tax benefits for full interest paid, for
money borrowed in respect of any of the property that is treated as let-out.
This deduction on interest payment is
available, for any residential or commercial property owned by you. It is also
available, irrespective of whether the money is borrowed from a bank or housing
company, or from friends or relatives, for the purpose of repairs, purchase
construction, reconstruction, etc.
Any interest paid during the construction
period can be amortised and can be claimed in five equal instalments, beginning
from the year in which the construction is completed and possession of the
house is taken.
Tax benefit on
repayment of principal
As per the provisions of Section 80C, you can
claim up to Rs 1.5 lakhs for repayment of housing loan taken from specified
institutions, including cost of registration and stamp duty of a residential
house. Although you can take home loans for more than one property, the amount
of deduction shall be restricted to Rs 1.5 lakhs. The overall amount of
deduction, includes other items like provident fund contribution, life
insurance premium, tuition fees, PPF contribution, NSC, ELSS, etc.

 

This deduction can be claimed only after you
have taken possession of the property. If you have started repaying the
principal of a home loan before taking possession, this benefit is not
available to you. Please note that repayments of loan taken from your friends
and relatives, are not eligible for this deduction.

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