Home loans can help people construct or buy their dream abode. Home is among the essential things for survival but can cost a lot. With home loans, individuals can have a roof over their heads without savings. They can always return the home loan amount to the lender in regular instalments. Do you know that many people enjoy tax benefits by taking a home loan? As per the India Income Tax Act, home loans offer a waiver on an individual’s taxes. Some people are confused about the tax benefits of a second home loan. Let us see the tax benefits for people applying for a second home loan.
Are tax benefits available for a second home loan?
For now, tax benefits are available for a second home loan in India. However, it wasn’t like that always, as tax benefits were only limited to the first home loan. Until 2018, tax benefits were offered only to people with a single home loan. Even if an individual has two homes on loan, only one of them was declared as self-occupied. For the second home on loan, individuals had to submit the taxes. The government charges taxes against the property, which is often referred to as the national rent. In the financial year 2019 – 20, the government changed the rule and offered tax benefits on the second home loan. 2nd home loan tax benefits are still operational in 2022.
What are the tax benefits of a second home loan?
When the rules changed in the 2019-20 financial years, individuals could declare two houses as self-occupied. At present, the rule is the same, and individuals can declare two houses as self-occupied. Once the houses are declared, individuals can enjoy tax benefits on loans for both houses. Tax benefits for a second home loan are mentioned in the Income Tax Act. 2nd home loan tax benefits are as follows:
- As per section 24(b) of the income tax act, individuals can enjoy up to INR 2 lakh tax waiver on paying the interest charges for a self-occupied home/property. When someone applies for a home loan, they must return it in instalments. Every home loan instalment will consist of a part of the principal amount and the interest charge. As per the income tax act, individuals can enjoy tax benefits for the interest charge paid for the second home loan in a financial year.
- According to section 24(b), individuals can enjoy tax benefits for a home loan on the let-out property. For interest charges paid for a home on the let-out property, individuals can lower their tax amount. One can claim complete interest charges as tax benefits for a home loan on a let-out property.
- Individuals must deposit the interest charges to the loan provider for every home loan. As per section 80C of the income tax act, people can claim the taxes paid for the principal amount of a second home loan.
The above benefits on a second home loan are for a single person. Joint home loan individuals can get extra tax benefits as per the income tax act. For joint home loans, each individual can claim for separate tax benefit.
How to apply for tax benefits on a second home loan?
Before applying for a tax benefit, ensure the home loan is issued in your name. For joint home loans, an individual should be the owner or co-owner of the property. While filing income tax returns, you can apply for tax benefits on a second home loan. Before applying, individuals should use a home loan interest rate calculator and evaluate the tax benefits in a financial year.