25 JUNE, 2021

If you have purchased or are planning to purchase a second home, it is a milestone in your life and deserves celebration. If the first home purchase was with the help of a home loan, you have experienced home loan tax benefits. It is likely that you look forward to tax benefits that you can avail on the second home loan also. To find out how you can save taxes on your second home loan, keep reading.

Home Loan Tax Benefits under Section 80C
As home loans consist of two components, namely the principal amount and the interest, under Section 80C, you can claim the principal sum as a deduction. The maximum amount that you can claim is Rs 1.5 Lakh per year. But you should remember that deductions under Section 80C of the Income Tax Act are shared by other investments as well.

The tax benefit for the principal component is allowed if your second home is rented, empty or self-occupied. However, if the home loan for your first house is still ongoing then you can claim a combined sum of Rs 1.5 Lakh for both loans. Hence, you must plan your investments to make the most of the deductions available under Section 80C.

Deductions under Section 24(B)
You can claim home loan tax benefits on the interest component under Section 24(B) of the Income Tax Act. But the maximum deduction that you can claim for interest payments varies based on its occupancy status. So, if you or your family is living in the house, then it is termed as self-occupied. But if your home is rented to someone else, then it is called a let-out property. Now, read further to understand the tax benefits that you can claim:

  • Your second home is self-occupied or vacant
    In case your parents are living in the second home, then both your houses are considered as self-occupied. Even if your home is vacant, it shall be treated as a self-occupied house. For this, you can claim a deduction for a maximum amount of Rs 2 Lakh under Section 24(B) of the Income Tax Act. But you must remember that you can claim a combined sum of Rs 2 Lakh if the home loan for your first house is still ongoing.
  • Your first home is self-occupied and the second home is rented
    If you have rented your second home, it is a let-out property, and you can claim a maximum deduction of Rs 2 Lakh under Section 24(B). Earlier the interest component of the loan EMI was fully deductible. If the interest amount was more than the rent received from your property, the remaining amount used to be adjusted against other income heads. But now, the amount you can claim as a deduction has been capped at Rs 2 Lakh per year.

 

Your second home can either be solely for investment purposes, to diversify your portfolio or as a holiday home. Keeping the above details in mind, make sure to explore the taxa aspects on your second home loan. So, without further ado, calculate your eligibility, consider your finances and apply for a home loan for your second home.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.