Buying a home is a major financial task. It is like achieving a major milestone in life. The sense of accomplishment that you experience after you get the ownership documents is beyond words to explain. But when you accomplish the task once, doing it for the second time becomes an easy-peasy task for you. A lot of people do it: buy a second home for the sake of investment. A second home lets you earn rental income and increases your financial worth. Plus, buying a second home is considered a very viable retirement plan.
To sum up, all this, if you are planning to buy a second home, you would have to plan your budget the same way you did it while buying your first home. However, you can’t claim the tax rebate like the last time. According to RBI home loan guidelines, the tax benefits offered to first-time home buyers as per section 80C and 80EE of the Indian Income-Tax laws do not apply to second-time home buyers. However, you can claim the benefits available under section 24B. How?
The second property will be termed as ‘let out’ property. The property that is used to earn rental income. Now, in case of your first home loan, the benefits available under section 24B is capped at Rs 2 lakh. However, you can claim the entire interest paid towards your second home loan as a deduction as per section 24b. As per the provisions under the section 24, a second time home buyer can set off the loss they incurred from their second property and claim it as a deduction. Let us share an example to understand it better.
Let’s suppose you buy a house for the second time and you are paying Rs 1.5 lakh as interest towards the home loan every year. Now, considering the fact that second home is considered as a let out property - if the house fails to generate more than Rs 1 lakh as rental income every year - you can set off the loss against the payable income tax.