Many buyers are uncertain if these benefits still apply if the loan is taken out a second time, even though the majority of home loan customers are aware of the income tax benefits linked with their loans. Of course, the answer is a resounding yes. Read on for more information.
Even while purchasing a home has always been seen as a sound financial choice, the tax advantages on mortgage loans were formerly restricted to just one loan. However, a person may now deduct two home loans from their taxes.
Prior to the financial year 2019–20, a person who owned two properties might benefit from income tax breaks in connection to the one that they personally resided in. Based on the notional rent, or the amount that is supposed to be received as rent from the property, the owner was compelled to pay taxes on the second home or other property.
Advantages of taxes on the second-home loan
Section 80c deductions
Home loan payments are made up of principal and interest. Up to Rs 1.5 lakh of principal repayment may be deducted under Section 80C. Even if you have a second home loan, the maximum deduction for principal payments would still be Rs 1.5 lakh. Remember that investments like PPF, ELSS, and others are included in the 80C deduction.
There are various residential properties that qualify for this deduction. The residential properties’ status as owned, rented, or both is also unimportant. Finally, section 80C permits income tax benefits for principal repayment on first and second house loans of up to Rs 1.5 lakh.
tax advantages for paying interest
When assessing the tax advantages of a second home loan in India, we must also consider the interest payment deduction. A deduction for interest payments is allowed under Section 24. You may deduct up to 2 lakh rupees from your interest payments if you just own one house. There was no cap on the amount that might be subtracted as interest on a rental property.
There are various residential properties that qualify for this deduction. The residential properties’ status as owned, rented, or both is also unimportant. Finally, section 80C permits income tax benefits for principal repayment on first and second house loans of up to Rs 1.5 lakh.
Tax advantages for paying interest
When assessing the tax advantages of a second home loan in India, we must also consider the interest payment deduction. A deduction for interest payments is allowed under Section 24. You may deduct up to 2 lakh rupees from your interest payments if you just own one house. There was no cap on the amount that might be subtracted as interest on a rental property.
The first residence is owned outright, while the second is rented. According to the most recent financial provisions, the second property cannot be considered to be rented out. It will be presumed that both houses are occupied as a result. The total amount of interest that can be claimed for both houses is 2 lakh rupees.
How to apply for house loan tax benefits
Ensure that the first and second mortgages are initially in your name. Make sure you are the sole owner of both homes or the co-owner if you are applying for a loan jointly.
The first residence is owned outright, while the second is rented.
According to the most recent financial provisions, the second property cannot be considered to be rented out. It will be presumed that both houses are occupied as a result. The total amount of interest that can be claimed for both houses is 2 lakh rupees.
You can utilize a free home loan tax advantage calculator on the official websites of several respected institutions.
To enable them to make the required TDS changes, provide a copy of the home loan interest certificate to your employer. If not, regular TDS deductions from your pay will continue as usual without any advantages. Your letter of loan sanction may also be required.
If step 3 is not completed, you must file income tax returns in order to take advantage of the tax benefits.
There are many reasons to buy a second home, such as the need to maintain a residence in your hometown, the need for a vacation home, or the need to increase your income by renting out your property.
