Home loan and tax benefits if you own multiple homes

Indian law allows a person to own multiple homes. However, for all the properties taken together, the amount of home loan available to you will depend on various factors. You are entitled to certain tax benefits for buying, building, renovating, or repairing a house property. This is with respect to the interest paid on borrowed money. The tax laws also allow you to claim tax benefits for repaying the principal amount for the purchase and construction of a residential house.

Tax benefit on interest payment

Under section 24(b), you may claim a deduction for interest payable on a loan taken for the purchase, construction, repair, or renovation of any property, whether commercial or residential. This interest payment deduction is available for any residential or commercial property which you own. The money, when borrowed from a bank/housing company or your friends, is always available. You can claim the interest deduction only from the year in which you take the possession.

For such extra houses that are used for self-occupation, you have to offer notional market rent as income from such house/s, even if you have not received any rent. Before 2019, the law allowed taxpayers to have only one self-occupied house. However, the amendment of the Finance Act 2019 has provided relief to some people who own and occupy a home in their city of current residence and another one in native places – either self-acquired or inherited.

Tax benefit on repayment of principal

The tax laws allow you to deduct the interest. It also, under certain circumstances, will enable you to rebate the principal amount for repayment. Under Section 80C, up to Rs 1.5 lakhs may be claimed by an individual. Additionally, a HUF for the repayment of the principal of the housing loan for residential property from specified institutions. This deduction is available in addition to other eligible items such as provident fund contribution, premium life insurance, NSC, etc. This deduction is also available for any amount payable for a residential house’s registration and stamp duty.

The income tax legislation has no restriction on the number of homes you can claim this deduction for. Also, for this purpose, the income tax laws do not distinguish between self-occupied property or a let-out property. You can claim this deduction, too, after you have taken possession of the property. If you have started repaying the principal of a home loan before taking control, you cannot claim any tax benefits for such payment, either now or in the future.

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