Second home loan query – Tax benefits

POSTED BY Bhanu Prakash ON April 16, 2013 7:49 pm COMMENTS (24)

24 replies on this article “Second home loan query – Tax benefits”

  1. Manmohansinh says:

    hi sir,

    I own house in A city (Home loan is going on..I am taking tax benefit and i an only applicant), After few years me and my wife purchase a new home in B city (Applicant was she, I was co-applicant,She take all home loan tax benefit).

    NOW home B is free from home loan.

    Now we plan to sell home in A city and plan to take new home in current staying C city. Can we both get tax benefit in this C city.

    Kindly reply

  2. Dear Bhanu, lesson from the discussion (in terms of the wrong info provided by TOI article), never accept any info as last & final. Even what I’m or others are telling on this or any other forum. Use your own brain to cross check. 🙂

    Thanks

    Ashal

    1. prabu says:

      Hi Ashal,
      Right now i have a running home loan (floating) with current interest of 11.75%, which i have let-out for rent and i am staying for rent in another home in the same city. As the interest rate is high (while other loan lenders reduced after RBI’s announcement on basis point reduction, my lender is continuing the same 11.75%) i am thinking of switching my loan to another lender which could probably reduce it to 10.2% (service charges involved). On Tax (income loss from house property), i am not covering full 2 lacs benefit with this. Also i am planning to go for a second home loan.

      Now on personal & tax benefit aspect, what would be right option to pursuit?
      A) Switch over the loan to another lender for a lesser interest (at a Cost) and Go for a second home loan
      B) Continue with current loan and Go for a second home loan

      Can you pls suggest.

      Regards
      Prabu

  3. Bhanu Prakash says:

    Thanks Ashal for discrete level clarification.

  4. Dear Bhanu, to close the 1st loan, you w’d have to divert a good amount of your savings. In my personal opinion, it’s advisable to run both loans if your cashflow is strong enough. Put 2nd house on rent. Maximize your tax savings as per condition 1 above.

    Your total income ‘ll be calculated as below.

    1. Salary Income
    2. Income from house property –
    a. from house 1 – Say 80000 in year 2016 being self occupied
    b. For house – 2 a detailed calculation ‘ll be like this –
    A. Gross yly rental income = 63000 (I’m taking example @ 5250 mly)
    B. Tax paid to local municipal body = 3000
    C. Net rental income = A – B = 60000
    D. 30% std. deduction of C above for upkeep & maint. of the house = 18000
    E. Interest paid on home loan = 500000 (my example)
    F. Income from house property no. 2 = C – (D+E) = 60000 – (18000+500000) = – 458000
    So 2a+2b = -80000 -458000 = -533000
    3. Income from other sources – say interest income

    So Income from house property in the above example ‘ll be -533000 & you can set it off against your salary income/

    Hope it clears your all doubt.

    Thanks

    Ashal

  5. Bhanu Prakash says:

    Dear Ashal,

    Expecting your reply.

    Regards,
    Bhanu

  6. Dear Aman, nothing wrong in your reply except the thing that you quoted a direct contact phone no. To protect the privacy as well as safety from spammers, blank callers, production of e-mail ids or contact nos is prohibited as per forum policy.

    Please take note of this.

    Regarding the tax benefit discussed by you, please check the over discussion from start till your reply & do tell me what more do you want to guide. All of us ‘ll be happy to learn from you.

    Thanks

    Ashal

  7. Aman Jawanda says:

    Dear Bhanu,
    As you want detailed information on Tax Benefits. I would love to guide you.
    There is an Income Tax act under section 24(b). According to the act you will get deduction for “interest paid” on Home Loan.

    It is applicable on Home loan for purchase of a house or construction of the house property. You can avail a deduction of up to Rs. 1,50,000 of your total tax liability. Also reconstruction, renewal or repairs are eligible for deductions under the said section.

    If you still need some advice you can call at 600 11 600 (with STD Code) its a Financial Expert’s number. He will definitely provide you the best solution.

  8. Bhanu Prakash says:

    Dear Ashal,

    Below is my understand, please correct it wrong. Divided into two conditions according to my would be situation.

    Possession in year 2016
    ===================================================
    1) Conditions:
    Year by 2016, after getting possession of 2nd home
    First home loan closed.
    self occupied first home not 2nd home
    second home showing rental income and declared as well.

    Tax Benefits:
    total taxable income = regular income + second house rental income
    All interest paid in FY + 20% of total interest paid during construction period
    ===============================================
    ================================================
    2) Conditions:
    Year by 2016, after getting possession of 2nd home
    First home loan closed.
    self occupied 2nd home not 1st home
    First home showing rental income and declared as well.

    Tax Benefits:
    total income = regular income + First house rental income
    1.5L max or less if paid interest is less.
    ===============================================

    ** Doubt: Some people told me to get max benefit (FY + 20%) you have to showing running both the loans. Please clarify. **

    Regards,
    Bhanu

  9. Dear Bhanu, you are again misunderstanding. As the house in question is 2nd home loan, after declaring the rental income from it, you can claim full interest due in that FY + 20% carry over interest.

    In case by 2016, you close the 1st loan & want to avail tax benefit on 2nd loan as self occupied house, then the combined limit ‘ll be 1.5L Rs. only (not 1.5+20%). In case you declare rental income, then the situation ‘ll be as above no limit + 20%.

    Thanks

    Ashal

  10. Bhanu Prakash says:

    Hi Ashal,

    Yes, both links are validating what you have written. Cap on interest claim is of 1.5L I think it include 20% as well. I mean it is not 1.5L + 20% after getting possession.
    Now it is Sprite clear hai … 🙂

    My 2nd query:
    Suppose I got possession of 2nd house in 2016. Rest is same as it is except my first home is closed and second home loan is running.
    What tax benefits i would get?

    Regards,
    Bhanu

    Regards,
    Bhanu

  11. Dear Bhanu, please read my above reply, posted with links from official Income Tax site links.

    Thanks

    Ashal

  12. Dear Shyamantak, is the house in question is under possession? The answer is know for dear Bhanu Prakash as of now. So what you are telling is not possible as of now. Yes once the house is under possession, this ‘ll be the way to maximize tax saving.

    Sprite Clear hai………… 🙂

    Thanks

    Ashal

    1. Bhanu Prakash says:

      Thanks Shyamantak and Ashal. This was my second query. But not discussing this as of now.

      I would request Ashal please give your views on above query asked by me with link provided regarding tax benefits for under construction apartment 20% tax benefit…

      Regards,
      Bhanu

  13. Dear Bhanu, there are 2 wrong info provided in the article shared by you. First one is related to home loan principal repayment. Section 80C, does not differentiate between the 1st loan or the 2nd loan or 3rd or……. Whereas in the article the author clearly says – no principal repayment benefit. Please don’t go by my words, check on your own the official version from here –

    http://law.incometaxindia.gov.in/dittaxmann/incometaxacts/2008itact/section80c.htm

    Now comes the the interest benefit. Again it’s mistake on part of author that interest of construction phase can be claimed in 20% installments from construction completion till possession. The actual act says, the under construction interest ‘ll be available for tax benefit in 5 installments of 20% each, starting from the FY when you get the possession of your house. Again, please don’t go by my words & check the official version here –

    http://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=75b4aeaf-f25e-41bd-a339-aa1788291347&rdb=sec&yr=a56ea192-3ca8-433a-a515-ed68a062eac7&sec=24&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws

    Both the links shared above are the official Income Tax site links. Now you decide, what’s wrong & what’s right.

    Thanks

    Ashal

  14. Bhanu Prakash says:

    Hi Ashal,

    I have another query for the same i would ask later.

    First clarification regarding same situation.

    Please refer below link.
    http://articles.economictimes.indiatimes.com/2012-04-23/personal-finance/31386956_1_deductions-home-loans-second-house

    copied text from link.
    In case the house is yet to be constructed, 20% of the total interest paid during the preconstruction period is also allowed as tax deduction. This is available for five years from the time the construction is complete till you get possession.

    Please share your views.

    Regards,
    Bhanu

  15. Dear Bhanu, as the possession of your house is not with you, interest related benefit ‘ll not be for you. You can claim principal repayment benefit within the over all limit of 1L Rs. of section 80C.

    To claim interest benefit, you w’d have to wait till possession of your house.

    Thanks

    Ashal

    1. Syamantak says:

      Ashal,

      How about showing a notional income (rental) from the house thats in the different city and then claim interest benefit from the 2nd house as well? in that case Loss from house property can be more than 1.5L as well.

      Do you think that to be a good option?

  16. Dear Bhanu, is it Pre EMI or full EMI, for 2nd house?

    Thanks

    Ashal

    1. Bhanu Prakash says:

      Hi Ashal,

      It will be full EMI not PreEMI.

      Regards,
      Bhanu

  17. Bhanu Prakash says:

    For both houses i am paying the EMI.
    For first house I am paying the EMI. And for second as well I will only pay the EMI.

  18. Bhanu Prakash says:

    Hi,

    Recently booked a second home (in NOIDA). But loan (tenure-20Y, construction lined, posession after 36 months) is not disburshed. It shall be disburshed in coming months (june/july 2013).

    My fisrt home loan will finish in next 24 months. Currently i am staying in my fisrt home in Bangalore.

    My query is what tax benefits i can get. And how can i get maximum tax benefit.
    For both houses i am paying the EMI.

    Thanks,
    Bhanu

  19. Dear Bhanu, what’s the query?

    Thanks

    Ashal

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