Aug 29, 2023

Unlocking Second Home Loan Tax Benefits: A Comprehensive Overview

by Godrej Properties Limited



Investing in a second home is wise for the additional space and security it provides and the attractive second home loan tax benefits, especially when rented out. Furthermore, if the property gets rented out, potential tax advantages through allowable deductions on maintenance and other expenses contribute to a favourable financial outlook. From deductions under section 80C to claiming interest payments, we uncover the tax benefit on the second home loan. 

Tax Benefits on Second Home Loan - Section 80C

Those contemplating a second home loan tax benefit can claim deductions under section 80C. This section allows for tax benefits on the principal repayment, which is capped at a maximum of Rs 1.5 lakh. Even if you have multiple house properties, the deduction remains consistent. Whether your houses are self-occupied or rented, the tax benefit on the principal repayment for both stays capped at Rs 1.5 lakh.

Revealing Interest Payment Benefits - Section 24

Delving into the tax benefits for a second home loan, we encounter section 24, which governs the deduction on interest payments. Previously, owning a let-out property had no upper limit on interest deduction. However, with Budget 2019's provisions, even the second house, if vacant, cannot be deemed let out. Let's examine the second home loan tax benefit under two different scenarios:

Self-Occupied First Home and Vacant Second Home

In this scenario, the latest budget provisions consider the second home self-occupied, preventing it from being deemed let out. As a result, the combined interest claimed on both properties cannot exceed Rs 2 lakh, ensuring a reasonable deduction for homeowners.

Self-Occupied First Home and Rented Second Home

When the first home is self-occupied, and the second property is on rent, homeowners must declare the rental income. From this income, a standard deduction of 30 per cent can be availed, along with unlimited interest on the loan and municipal taxes paid. An additional benefit includes claiming up to Rs 2 lakh against other income sources, making it a lucrative option for those exploring a second home loan.

Conclusion: What Every Second Home Buyer Should Know

A second home loan can be a lucrative financial move, providing a sense of security and substantial tax benefits. Under section 80C, homeowners can avail of deductions on principal repayment, while section 24 allows for interest payment deductions. 



Q: Can I claim tax benefits on a second home loan?

A: Deductions under section 80C are available for principal repayment, up to Rs 1.5 lakh, irrespective of the number of house properties.

Q: What are the interest payment benefits on a second home loan?

A: Under section 24, homeowners can claim a maximum deduction of Rs 2 lakh on interest payments for a self-occupied first home. The deduction for a rented second home includes a standard 30% deduction, interest on the loan (without any upper limit), and municipal taxes paid. One can claim Up to Rs 2 lakh against other income sources, with any excess loss carried forward for eight assessment years.

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