Purchasing a house is considered a milestone in India and investing in a second home is quite popular both as an investment opportunity or adding a valuable asset to the family name. A home loan makes financing a second home much easier and the income tax rebate on second home loan makes this facility more attractive.
To get a better understanding on second home interest tax deduction in India, tax exemption on second home loan interest and related factors, read on.
Self-occupied property and let out property are two forms of house property that are used in the second home loan tax benefit calculator. The government permits taxpayers to declare the value of their two houses as self-occupied. This means that you can enjoy the benefit of no tax with regards to the two owned properties.
Now, with regard to deductions, the income tax benefit of a second home loan is limited only to the actual interest payments made or up to a limit of Rs.2 lakh. Any additional amount paid as tax gets carried forward for the next 8 years and is adjusted under the income head ‘Income from house property’. This deduction is only applicable to a let-out property.
When you opt to buy a second home through a home loan, then you can avail the applicable tax benefit on second home loan’s payments. As mentioned earlier, Section 80 (C) benefits such as the deduction for principal repayments, aren’t applicable but you can benefit from Section 24 (b) provisions. This interest benefit on second housing loan is capped at Rs.2 lakh.
To claim the benefit, you must declare the rental income or enter the notional rent amount with the standard 30% deduction, municipal taxes and the interest paid on the loan.
Considering that the cost of real estate in India is quite steep, tax exemption on the second home loan helps in making the purchase more affordable. It helps to know about these benefits as the tax savings can compound over the years and net you a decent amount. However, to truly enjoy a financially favourable experience, you need to ensure that you opt for the right lender.
For a feature-rich second home loan, opt for the Bajaj Housing Finance Limited Home Loan. Along with significant tax benefits, the offering allows you to enjoy a competitive interest rate and has nominal fees and charges. To borrow easily,simply apply online and benefit from a stress-free loan application.
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Last update on 11-Mar-2021
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