Are you planning to buy another home? Are you relocating to another city and don't want to stay in a rented house? Did you know that owning a second home is an advantage? If you are curious about what owning a second home is like and wondering if taxes will be doubled. Then, you have come to the right place to have all questions answered.

Usually, in India, many people buy more than one property and mostly with the help of a home loan as it is an easier way to own a property and gives tax benefits. This second home can be either a place of stay or can be rented out. In either case, the tax treatment process will be different.

Many people own more than one house – few keep it idle, and others rent it. If you have either purchased a second house or intend to buy one, know that the tax status of interest charged on a home loan would be different in all cases. 

About section 80C:

Home loan repayments shall consist of principal and interest. Under section 80C, the principal reimbursement deduction is valid for a cumulative balance of Rs. 1.5 lakh. Whereas, for the second home loan, the highest concession is Rs. 1.5 lakh for principal payments. Note that the 80C deduction also covers savings such as life PPF, ELSS, etc. You will claim this deduction on more than one house property. It does not matter if the houses are self-occupied or rented.

In brief, the income tax benefits on the second home loan and the first home loan for the principal repayment can be up to a limit of Rs 1.5 lakh under section 80C.

Interest payment and tax benefits:

When contemplating second home loan tax benefits, we still need to remember the allowance available for interest payments. Deductions required for the amount of interest are eligible in compliance with section 24. If you own only one home, you can demand a maximum interest cost deduction of Rs 2 lakh. There was no upper cap on the assertion of interest as a deduction on a let-out house. But from Budget 2019, you will deem your second house to be self-occupied. So even though it is vacant, it can not be said to have been let out.

Let us recognize the loan tax benefits of a second home which can be either a flat or villa is mentioned below:

1.   The first home is self-occupied, and the second home is empty:

According to the most current clauses of the budget, the second home, if left empty, will be considered self-occupied. Interest claimed on both houses cannot exceed Rs 2 lakh.

2.   The first home is self-occupied, while the second is on rent:

You have to disclose the rental revenue of the second house. From here, you can subtract the statutory deduction of 30%, interest on the loan (without any upper limit), and local taxes charged. You may also demand up to Rs 2 lakh against other sources of income. Any loss over Rs 2 lakh can be carried forward for the next eight appraisal years.

3.   Tax benefit on second home loan in the same city

There is another benefit associated with the tax levied on second home loans in the same city. Income tax exemption can be claimed on the repayment of the home loan and house rent allowance. It doesn't matter that both the properties are present in the same city, and you can enjoy claiming the tax benefits on both the housing properties.

For years, the act of buying houses and other assets has always been a profitable option. So, don't wait much, fulfil your dreams, and go ahead with buying your second home.