Tax Benefits of a Second Home Loan: Save More on Taxes

While Home Loan borrowers are generally well aware of the income tax benefits on their loans, many buyers have doubts regarding whether tax benefits on such loans are allowed, if taken for the second time. The answer to that is a resounding yes. Read on to know more.

While purchasing a home has always been considered a good investment option, the tax benefits on home loans were earlier restricted to only one loan. However, now an individual can claim tax benefits on two Home Loans.

Prior to the financial year 2019-20, an individual owning two houses could claim income tax benefits with respect to the house that was self-occupied by the owner. For the second house or property, the individual was liable to pay taxes as per notional rent, which is the amount one receives as rent from the property.

Tax Benefits on Second Home Loan

The Government made a significant amendment to the financial budget for FY 2019-20 in which taxpayers have been allowed to declare two houses as self-occupied. As a result, taxpayers can now claim tax benefits on a second Home Loan, in addition to their first Home Loan.

The applicable Home Loan tax benefit under various sections of the Income Tax Act 1961 are as follows:

It may be noted that all the income tax benefits mentioned above are calculated per person and not per property. Therefore, applying for a joint Home Loan for a second home can have added advantages, as each owner of the property can separately claim income tax benefit on the second loan, subject to the actual payment incurred concerning the principal and interest.

Procedure to Claim Home Loan Tax Benefits

1. To begin with, ensure that both the first and second Home Loan is in your name. In case of a joint loan application, ensure that you are a co-owner or owner of both homes
2. Calculate the tax benefit on a second Home Loan in advance to save time and unnecessary hassles in the future. You can also use the free home loan tax benefit calculator available on the official website of many reputed banks
3. Submit your Home Loan Interest Certificate to your employer to adjust your TDS calculation, accordingly. Failing to do so will result in continuation of regular TDS deduction from your salary without any benefits. Additionally, you might be required to submit your loan Sanction Letter as well
4. In case you forget to follow step 3, you will have to file income tax returns to claim the tax benefits.

Planning to maintain a residence in your hometown, buying a holiday home, or planning to create a second income source by renting out your property; there can be many reasons to buy a second home. Now that tax benefits are also available, you can consider taking a second Home Loan to build another nest for your family.