Buying a second home can make for a sound investment choice. With the help of a Home Loan, this move is made easier and tax-effective. The Income Tax Act, 1961 has special provisions as per the old tax regime, in place to incentivise the purchase of a second residential property by allowing deductions on the second Home Loan.
Tax Benefits on Second Home Loan According to Section 80C
Availing of a second Home Loan allows you tax benefits on the principal portion of your Home Loan repayment. You can claim a deduction of up to Rs.1.5 Lakh under section 80C of the Income Tax Act, 1961.
Home Loan EMIs generally consist of two components - the principal amount and the interest. Per Section 80C of the Income Tax Act, a borrower can claim a tax deduction of up to Rs.1.5 Lakh only on the principal payments every financial year. This deduction on principal applies collectively to both the first and second Home Loans. You can use our Income tax Calculator to calculate tax benefits on a Home Loan.
Tax Benefits on Second Home Loan Under Section 24(b)
Additionally, in the case of a self-occupied property, if the construction is completed within five years of sanctioning the loan amount, the interest paid is eligible for a deduction of up to Rs.2 Lakh under Section 24(b) of the Income Tax Act.
In case you own only one house, you can claim a maximum deduction of Rs.2 Lakh on interest payment.
Also Read: Detailed information about Home Loan Tax Benefits
Case 1: None of the Property is Let Out
In case you live in one house and have a second house which is vacant, interest claimed on both houses cannot exceed Rs.2 Lakh.
Case 2: One Home is Occupied by the Applicant and the Other is Rented
In case you live in one house and have rented out the second one, you have to declare the rental income from the latter and pay tax after the deductions of maintenance and repairing charges.
To avail of tax benefits on a second Home Loan, ensure that both the first and second Home Loans are under your name. You can also submit your Home Loan interest certificate and sanction letter to your employer for TDS deductions.
Tax exemptions on a second Home Loan can increase tax savings. Tax savings can compound over the years; however, to truly enjoy a financially favourable experience, you should ensure that you opt for the right lender.
If you are seeking a Home Loan, consider applying with Bajaj Housing Finance as we offer a competitive interest rate and a flexible repayment tenor, basis eligibility.
*Terms and conditions apply.
Also Read: Know about Income Tax Slabs
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