Thanks to the economic growth that India is witnessing, today, there are numerous affordable housing options. As a result, a person can now purchase more than one home. This is quite a shift from a few years ago when a person had to save their money for decades before buying a home; and when they bought one, they lived in it forever. However, the story is very different now and you can easily buy two homes in the same or different cities.
Buying a Second Home
You can easily take a home loan to buy a second home, and with tax benefits on second home loan available, you should not shy away from it. Of course, it goes without saying that there are a few things that you need to be aware of if you want to enjoy tax benefits on your second home loan.
You will get tax benefits only for the home that is self-occupied. It means that you are physically living in the house and have not given it out on rent nor do you get an income from the property.
So, if you are looking to enjoy tax benefits on second home loan, it is essential that you show your second home as being self-occupied while the first property that you already own can be shown as rented out or unoccupied property.
Tax Benefits on Second Mortgage Loan
In case the property gets built within five years of taking the loan, you can avail tax exemption of up to INR2 lakh on the interest paid. The amount increases to INR3 lakh for a senior citizen.
However, if the second home does not get completed within five years of taking the second home loan, the tax exemption limit is restricted to INR30,000. If the property price is less than INR35 lakh, the exemption limit increases to INR50,000.
It is prudent to remember that these tax benefits are only for self-occupied second home. If you are not occupying it, there is no tax exemption. Instead, it will be considered an asset and you will be liable to pay 1% additional tax in case the property cost more than INR30 lakh.