Guide for claiming tax benefit on your second home loan?

Have you been thinking about buying a second home? A home is more than just a place you live in; it is an asset to hold on to. And if you have the means to invest in an additional asset, you must! But then, there are a lot of decisions to be taken before investing in a home. You’ve already been paying EMIs for your current home. Will you be able to get a second home loan as easily? How about going for a second home loan that not only promises a more comfortable living space but also comes with savings on your tax? 

Well, you can very well take a second housing loan even if you have one going.

Earlier, if a person owned more than a single house, he/she could claim tax benefits on the home loan only on the occupied property, and this could only be one. In the case of a second property, the tax to be paid was calculated on the basis of notional rent. Notional rent is an income you would have earned if you had put that house on rent. 

Additional Read – Planning to Buy A Second Home? Make Sure To Follow This Home Buying Guide

However, in the Interim Budget 2019, it was proposed that an individual has the right to claim his second home, too, as self-occupied property. Eventually, this proposal was accepted, and it helped borrowers a great deal in saving more tax.

Here’s how you can claim tax benefit on your second housing loan:

• Section 80C: You can claim deduction on the principal amount for a maximum of Rs. 1.5 lakh under section 80C. This deduction can be claimed on more than one property regardless of whether it is self-occupied or has been rented out.
• Section 24(b): Under this section, you can claim a deduction on interest payment for a maximum limit of Rs. 2 lakh. 

Additional Read – Home Loan Tax Benefits Explaining Section 80EEA, 24 and 80C

There can be two possible cases here:

a) Both the houses Self-occupied: As per the latest provisions in the budget, the second home cannot be deemed as let out. Therefore, both the houses will be considered self-occupied. The total home loan interest claimed on both the houses should be less than Rs. 2 lakh.

b) First home self-occupied, second house on rent: You have to declare the rental income of the second house. From that, you can deduct a standard 30% interest on home loan and the municipal taxes. You are entitled to claim up to Rs. 2 lakh against other sources of income.

Here are the steps to claim tax credit:

• Ensure that the residential property is registered in your name. In case it is a joint home loan, make sure you are registered as the co-owner of the house.
• Calculate the total amount that you can claim as a deduction on tax.
• Submit your home loan interest certificate to your employer so that the TDS can be adjusted. If you are not able to follow this step, file your IT returns.

With Tata Capital, buying a house for the second time is easier than ever. Visit their website to check if you meet the home loan eligibility criteria or if you have any questions that you need to be answered.