Buy another property with the help of loan
According to tax experts, if you have a property, you can buy another property with the help of a loan. With this you will have two properties. Also you can get good tax benefit. Now you have two residential properties, one of which you own and you can let out the other.
what is identity
Self Occupied Property (SOP), which you use as your residence, is distinguished from other residential property. The same second house will be considered as given on rent anyway. As a result, it will be taxed even if you do not let it out.
Second property to be considered on rent
As per the rules, the annual value of the house which you are considering as private possession will be considered as zero. This property will not come under tax. You will have to pay tax on your rental income. The actual rent of your rented house is taxable under the head “Revenue from house property”. Even if your second house is not given on rent, but it will be considered as rent only.
Tax deduction will be available in 80-C
Be aware that principal and interest mortgage payments have two components. In this, deduction is allowed on repayment of principal up to Rs 1.5 lakh in Section 80-C. The maximum tax exemption on second home loan will be up to Rs 1.5 lakh. Section 80-C allows income tax benefit on second home loan and repayment of principal up to a maximum of Rs 1.5 lakh on second and first home loans. This deduction is available for several residential properties.
Tax benefits for second home loan
People who have two houses can avail tax benefits on the second home loan. If you have already paid the full amount for your property, then you will not get any such benefit. If you own more than one residential property for your own use, one of the properties will be treated as self-occupied, and its annual value will be deemed to be nil. Along with this, there are some important things, which you should take care of.
- As per the Income Tax Act, if you own more than 1 house, you can choose to have one of the two ‘Self Occupied Properties’ (SOP) in your possession.
- The rest of your property will be treated as “Deemed Let-Out Property” (DLOP). This will increase the taxable income by the amount of notional rent.
- In case you are taking a second house for letting out on rent or lease, the actual rent received by you will be considered as part of your taxable income subject to certain restrictions.
- Such taxes paid in a financial year, payments made to the local body, municipality tax are allowed as other home loan tax benefits in India.
- Tax benefit will be available for 5 years on the second home loan under construction.
- 20% of the pre-construction interest paid will be eligible for deduction.