How to Claim Tax Benefits on Multiple Home Loans
Aug 20, 2019 Home Loan
When it comes to buying a house, there is no restriction on the number of houses one can own. There is also no restriction on the number of home loans one can take to buy the properties. If your pocket allows you, then banks and financial institutes are more than willing to grant you the home loan. Not only these, but there are many tax benefits one can claim on multiple home loans.
We discuss both the tax benefit for the interest payment and tax benefit on principle.
1. Tax benefit on the principal amount:
Under Section 80D of Income Tax Act, 1961, one can claim up to Rs 1.5 lacs for the principal repayment, including the cost of stamp duty and registration charges. Even though the home loans can be taken for multiple properties, the tax deduction is restricted to only Rs 1.5 lacs in total. Other amounts included in the deduction are PPF, tuition fees, PF contribution, life insurance premium, and other such amounts.
The deduction can only be claimed after the possession of the house. If the repayment of the principal amount has started before the possession, then the benefit cannot be claimed. It is important to note that if you have taken a loan from friends and family, then it is not considered for deduction.
2. Tax benefit on the payment of interest:
Under Section 24B of Income-tax Act, one can claim the deduction of interest on the interest payable on a loan, repair, and construction or renovation. The deduction can be claimed if you own the property and it is self-occupied. The upper limit of the interest deduction is limited to Rs 2 lacs per annum. However, if the construction is not completed within five years of taking the loan, then the upper limit is defined to Rs 30,000.
If the property is owned by self but rented out, then the deduction can be claimed for the entire period of the interest paid without the restriction on the upper limit, against the rent amount received for each property.
In Budget 2019, the Finance Minister extended the benefits of the self-occupied properties to two houses. That means, that if you self acquires more than one property than the notional rental income has been exempted from your income tax.
With the proposed amendment, one may not be able to claim the second house as rent or let out property. The overall interest deduction for both the properties will be restricted to Rs 2 lacs resulting in lower losses under the head house property. This further lowers the possible tax benefits in the future from the set-off of carried forward losses.
For commercial and residential property, this deduction on interest payment is available. Irrespective of the source of the loan, the deduction on the interest is available.
We discuss both the tax benefit for the interest payment and tax benefit on principle.
1. Tax benefit on the principal amount:
Under Section 80D of Income Tax Act, 1961, one can claim up to Rs 1.5 lacs for the principal repayment, including the cost of stamp duty and registration charges. Even though the home loans can be taken for multiple properties, the tax deduction is restricted to only Rs 1.5 lacs in total. Other amounts included in the deduction are PPF, tuition fees, PF contribution, life insurance premium, and other such amounts.
The deduction can only be claimed after the possession of the house. If the repayment of the principal amount has started before the possession, then the benefit cannot be claimed. It is important to note that if you have taken a loan from friends and family, then it is not considered for deduction.
2. Tax benefit on the payment of interest:
Under Section 24B of Income-tax Act, one can claim the deduction of interest on the interest payable on a loan, repair, and construction or renovation. The deduction can be claimed if you own the property and it is self-occupied. The upper limit of the interest deduction is limited to Rs 2 lacs per annum. However, if the construction is not completed within five years of taking the loan, then the upper limit is defined to Rs 30,000.
If the property is owned by self but rented out, then the deduction can be claimed for the entire period of the interest paid without the restriction on the upper limit, against the rent amount received for each property.
In Budget 2019, the Finance Minister extended the benefits of the self-occupied properties to two houses. That means, that if you self acquires more than one property than the notional rental income has been exempted from your income tax.
With the proposed amendment, one may not be able to claim the second house as rent or let out property. The overall interest deduction for both the properties will be restricted to Rs 2 lacs resulting in lower losses under the head house property. This further lowers the possible tax benefits in the future from the set-off of carried forward losses.
For commercial and residential property, this deduction on interest payment is available. Irrespective of the source of the loan, the deduction on the interest is available.
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