Tax Benefit on interest paid on 2nd Home Loan ?

POSTED BY samirkumar ON May 14, 2014 3:26 pm COMMENTS (7)

I am having a home loan currently running for a flat in my hometown (Orissa). My parents stay there and am claiming tax benefit of 1.5L for the same since past 2 yrs.

As of now I have booked a property in the place (Karnataka) where I stay for my job which is my 2nd home loan. Am going to get the possession in another 2-3 months (EMI started).

I have still not decided to rent it or stay in it provided my parents will continue staying in my flat in hometown. As I know, if there are two home loans,  we get tax benefit for the entire interest we pay for the second home loan. Please suggest me ways to get maximum tax benefit i.e. for entire interest component of the 2nd homeloan. As per my knowledge, if I stay in the newly constructed flat purchased from the 2nd homelaon then I can show only 1.5L for tax benefit (and I cannot claim HRA).

So, if I stay in a rented flat then can I show entire interest paid for the 2nd homeloan ? (provided I will show rent earned from renting my 2nd home as income). If this is the case then at the same time can I claim HRA as well since am still staying in a rented flat ?
With all these going on will I still be able to show 1.5L for the 1st homeloan which is and will be still running for another 10 years ?

Please suggest me the best options.

Thanks..!!

7 replies on this article “Tax Benefit on interest paid on 2nd Home Loan ?”

  1. samirkumar says:

    Dear Ashal,
    I understand but I feel am forced to do so as there is no other option.
    Because if i stay in my new flat (thereby declaring my 1st flat as rented) then I cannot claim tax benefit on complete interest of my 2nd home(big amount of interest compared to 1st home).
    I don’t see any other better options.
    And sicne I will be declaring as I have rented my 2nd flat which automatically enables me to claim HRA.

    Regards,
    Samir

  2. ashalanshu says:

    Dear Samir, my answer was meant for actual renting of your 2nd house and your own renting. 🙂

    Thanks

    Ashal

  3. ashalanshu says:

    Dear Samir, do it at your own risk as I smell a Tax evasion here. 🙂

    Thanks

    Ashal

  4. samirkumar says:

    Thanks Ashal for your advice.
    Even I was thinking the same. I will stay in the new flat but show it as rented and claim tax benefit on the complete interest paid for it. Also would show a nominal rent for the same.
    But since I show that I have rented this new flat that means I myslef stay in a rented flat and hence I believe I can claim HRA as well.
    That means I can claim both interest and HRA at the same time.
    In summary (claim 1.5L for 1st flat) + (claim complete interest on 2nd flat) + (claim HRA) – (rental income from 2nd flat)
    Please correct me if am wrong.

  5. ashalanshu says:

    Dear Samirkumar, please put the 2nd house on rent. Declare the rental income from 2nd house. Claim entire interest on it as deduction. As your own residence is a rented one, you can claim HRA benefit. As 1st house is declared self occupied, you can still claim 1.5L Rs. max. interest from it.

    Thanks

    Ashal

  6. ashalanshu says:

    Dear Praveen, what should we made out from your reply? 2nd house is not eligible for tax benefit but you can claim interest. ‘ll you please elaborate?

    Thanks

    Ashal

  7. praveen.rs says:

    2nd house is not eligible for tax exemption , but read below …

    Self occupied is eligible for tax exemption, other one is considered as let out , even though your parents are staying or its empty (you have to show the market value as rent for this)

    But you can deduct the full interest which you are paying for let out house as loss of
    income

    Read the below link for more info ..

    http://www.moneycontrol.com/news/real-estate/knowtax-implicationssecond-house_884421.html

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