If you own a house already, you have the tax exemption while availing home loan to buy the second house. The Indian law allows a person to buy multiple homes and availing multiple home loans to buy new homes. One can have number of properties as he wants in his name and there is no restriction for it. Also there is no restriction in availing home loans, based on how many of your homes you claim tax benefits under tax laws or banking laws. But the amount of home loan for all the properties is made available to a person depends on some factors like age, earning and ability to pay the loan. Anyone can avail tax benefit based on interest paid or on repayment of the principal amount in borrowing money for buying, construction, repairing, renovating etc.
Following are some of the benefits of having multiple homes.
Tax benefit on interest payment
Anybody that owns multiple homes can claim deduction on interest payable for the loan taken by him/her. The loan can be for purchasing new houses, construction, repairing or renovation of any property- commercial or residential. Deducted interest payment is applicable against money borrowed from friends / relatives or borrowed from bank or any housing company. In case of under construction property, deducted interest payment will be made available right from the year when possession is taken by the person after construction is completed. During construction of the house period if any interest is paid, the value paid can be amortized and the person can claim after five equal installments from the completion of the construction.
In case of let out property/ies, we are entitled to claim the entire interest paid, without any upper ceiling against the rent received. If a person owns more than one house property and minimum 2 house properties are occupied by self. Then, he has to choose any one as self occupied and the other as self occupied but deemed to have been let out. For the deemed to have been let out properties, owner needs to offer tax for notional income of the rent that the property fetches. So, once any such property is treated as let-out, we can claim the full interest paid with respect to such property.
Budget 2019 provisions for multiple home owners
Till date it was allowed a taxpayer to have only one self-owned property as self-occupied. But soon after the interim budget 2019 come into existence it is allowing a person to occupy two self-owned properties. As per budget, the deduction for the home loans will remain to be Rs. 2 lakhs for both the properties taken together. This will help the tax payers who own a house in their native place as their other property.
Tax benefits on principal amount repayment
A property owner can claim up to Rs 1.5 lakhs for repayment of the principal amount of the housing loan. Other benefits like provident fund contribution, life insurance premium, tuition fees, PPF contribution etc are also available along with the principal amount repayment. Deduction is also available for registration and stamp duty of a residential house. Income tax laws do not set restriction on the number of houses for which one can claim deduction. One can only claim deduction for repayment of principal amount Rs 1.5 lakhs for all the home loans taken together.
A home owner can claim deduction only after the possession of the property. The deduction is not applicable if the loan is taken from friends or relatives. If anyone sells or transfers his house within 5years of loan taken, deduction is not applicable in the transfer year. The deductions claimed earlier years are made reversed and taxation is done in the same year when transfer of the property is done.
