Claiming home loan tax benefits on multiple properties in India: What you need to know

I own a house in Rajasthan, for which I took a loan. The loan has been paid up substantially. I have been living in Haryana for the last four years. I want to buy one more house here. Can I avail of home loan tax benefits on the purchase of a second home loan? Is it possible to forgo the advantage of tax benefits on the first loan since it is now reduced to a nominal amount?

As far as claiming the home loan tax benefits for more than one house is concerned, the income tax laws do not restrict the number of properties for which you can claim the benefits. You can claim a deduction under Section 80C for repayment of a home loan taken for one or more residential house properties, a maximum of Rs. 1.50 lakh, and other eligible items.

Understanding home loan tax benefits for second property purchases in India

As per the income tax laws, an assesses can have a maximum of two houses as self-occupied. If the properties have been let out, you do not have the choice to treat them as self-occupied property and have to offer the rentals received for tax. You can claim 30% of the rent received as a standard deduction from rent and can claim full interest paid against the rent received. If anyone or both the houses are self-occupied, you can claim a maximum of ₹2 lakh as interest for all the self-occupied houses.

However, a maximum of ₹2 lakh loss under the house property head computed for all your properties can be set off against other income for the same year. In eight subsequent years, the balance unabsorbed loss, if any, can be set off against the positive income under the house property head.

Please note that if you opt for a new tax regime, you are not entitled to claim any deduction under Section 80C for repayment of the home loan and interest paid under Section 24b for interest paid in respect of self-occupied house properties. Regarding let-out properties, you can claim interest only to the extent of taxable rent, as no loss under the house property head is allowed to set off or carry 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.

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