In India, owning a second home can offer various income tax benefits under specific conditions, particularly when it comes to home loans. Here are the key income tax benefit for second home loan:
Interest Deduction under Section 24(b)For income tax exemption on second home loan can be claimed as a deduction from the total income.
Unlike the self-occupied property where the deduction limit is capped at ₹2 lakh per year, a second home is considered a "deemed let-out property" (DLOP) if it is not actually rented out. For DLOP, the entire interest amount paid on the home loan can be claimed as a deduction without any upper limit.
This can significantly reduce the taxable income, leading to substantial tax savings.
The principal repayment of the second home loan is also eligible for deduction under Section 80C of the Income Tax Act, subject to the overall limit of ₹1.5 lakh per financial year. This limit is shared with other eligible items like PPF, ELSS, and life insurance premiums.
When you own more than one property, only one can be treated as self-occupied, and the other is deemed to be rented out. For the deemed rented property, a notional rent is calculated and added to the owner’s income.
This notional rent is taxable, but the benefit is that the interest deduction under Section 24(b) for the second home loan can be substantial, often offsetting the notional rental income.
Under Section 80C, the stamp duty and registration charges for the second home can also be claimed, subject to the ₹1.5 lakh limit.
To claim these deductions, the home loan must be for the purchase or construction of the house, and the construction must be completed within five years from the end of the financial year in which the loan was taken.
Proper documentation, including loan statements and completion certificates, is crucial for claiming these benefits. Overall, while the income tax benefits on a second home loan in India can be significant, they require careful compliance with tax regulations and diligent financial planning.
This is all about income tax benefit for second home loan.
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Read more: What Is Section 24 Of Income Tax Act? How much tax can be saved by home loan? How to calculate depreciation as per income tax act? Can I claim HRA and interest on housing loan? Can you claim HRA for rent paid in another city?Your Feedback Matters! How was this Answer?
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Income Tax Benefit on Second Home Loan?
Kapil
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2022-02-08T10:00:58+00:00 2024-07-01T12:53:41+00:00Comment
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