It benefit for 2nd home

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2015 Hi

My name is Arjun and i worked as a salaried professional.

I already have a ongoing housing loan since 2008 and i am claiming tax benefit on interest paid towards as loss on house property since it is let out. Currently i see my interest component is going low and rent increasing i am not seeing any benefit. I am only able to claim about -1.2 Lakhs p.a.

Since i am unable to get max benefit from my first home, i wanted to know
1. If i can invest in a second home and would it help me save tax?
2. If so what is the max limit for loan?
3. Can I claim interest paid on that in full?
4. Can i still let out this property and still get tax benefit.

Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2015 Can someone pls help me on my query?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2024 Investing in a second home can have tax implications and benefits, but it's essential to understand the details and limitations to make an informed decision. Here's how it breaks down:

### 1. Tax Benefits on a Second Home

**Investing in a second home can indeed help you save tax, but there are some considerations:**

- **Interest on Home Loan**: For a second home, you can claim a tax deduction on the interest paid on the home loan under Section 24(b) of the Income Tax Act. The maximum deduction allowed is ₹2 lakh per annum. This applies to both self-occupied and let-out properties.

- **Principal Repayment**: Under Section 80C, you can claim a deduction up to ₹1.5 lakh per annum on the principal repayment of the home loan. This is applicable to both self-occupied and let-out properties.

- **Tax Benefit for Let-Out Property**: If you let out the second home, you can claim a deduction on the interest paid on the home loan against the rental income. There’s no upper limit on the interest deduction for a let-out property, so you can claim the entire amount of interest paid as a deduction from the rental income, which could reduce your taxable income.

### 2. Loan Limits

**There is no specific maximum limit on the home loan amount you can take for a second home, but a few factors affect this:**

- **Eligibility**: Your eligibility for a loan depends on your income, credit score, and repayment capacity. Lenders will assess these factors to determine the loan amount you qualify for.

- **Property Value**: The loan amount is typically a percentage of the property's value, often up to 75-80% of the property's market value.

### 3. Claiming Interest Paid

**For a second home:**

- **Self-Occupied Property**: The deduction on interest is limited to ₹2 lakh per annum.

- **Let-Out Property**: You can claim the entire amount of interest paid on the loan as a deduction from the rental income, with no upper limit.

### 4. Letting Out the Property

**Yes, you can let out the second property and still benefit from tax deductions:**

- **Rental Income**: The rental income from the second property will be taxable under "Income from House Property," but you can offset this with the interest deductions on the home loan.

- **Losses from Let-Out Property**: If the deductions (interest and municipal taxes) exceed the rental income, you can claim the loss from the let-out property against other heads of income under Section 71 of the Income Tax Act.

**In Summary:**

- You can claim up to ₹2 lakh on the interest paid on the home loan for a second home if it's self-occupied. If the property is let out, you can claim the full amount of interest paid.
- Principal repayment up to ₹1.5 lakh can be claimed under Section 80C.
- There’s no specific upper limit on the loan amount; it depends on your financial profile and property value.
- You can let out the property and still claim tax benefits on the interest paid and deduct any losses from rental income against other income.

**Consult a tax advisor or financial planner** for personalized advice and to ensure you’re leveraging all available benefits effectively.

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