I own a house in Rajasthan, for which I took a loan. The loan has been largely repaid. I have been living in Haryana for the past four years. I want to buy another house here. Can I enjoy tax benefits for my home loan when purchasing a second home loan? Is it possible to waive the tax benefit on the first loan, as it has now been reduced to a nominal amount?
As for claiming the tax benefits on more than one property, income tax laws do not limit the number of properties for which you can claim the benefits. You can claim a deduction under Section 80C for repayment of home loan taken on one or more properties, subject to a maximum of Rs. 1.50 lakh and other eligible items.
Understanding the tax benefits of home loans when purchasing a second property in India
According to income tax laws, an appraiser is allowed to own a maximum of two houses as a self-employed person. If the homes are rented, you do not have the choice to treat them as your own home and you must offer the rents received for tax purposes. You can claim 30% of the rental amount received as a standard deduction on the rental amount and you can claim the full interest on the rental amount received. If one or both homes are self-occupied, you can claim maximum compensation ₹2 lakh as interest for all independent houses.
However, maximum ₹A loss of Rs 2 lakh under the head of house property, calculated for all your properties, can be set off against other income for the same year. In eight subsequent years, any balance of unabsorbed loss can be offset against the positive income under the home ownership principal.
Please note that if you opt for a new tax regime, you will not be able to claim the deduction under section 80C for the repayment of the home loan and the interest paid under section 24b for the interest paid under a own home. For rented properties, you can only claim interest equal to the taxable rent, because equity losses cannot be offset or carried forward.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to contact certified experts before making investment decisions.
