How many house you can own and what are the tax implications of owning more than one house?
People frequently ask me as to how many house one can buy and own at a time in own name. The answer is as many as you want and can afford. So there are no restrictions under the tax laws or general laws on the number of houses you can own. Likewise I also get queries as to for how many houses I can obtain the home loan. The answer again is the same. i.e. as many as you wish and you are able to service. But there are certain tax implications in case you own more than one house property. Let us understand the income tax implications.
Capital gains exemption on investing in a house
As per the tax laws in India you can claim exemption from long term capital gains (LTCG) if you buy or construct a residential house. The exemption for investment in residential houses can be claimed under two categories. One exemption available is under Section 54 for LTCG on sale of a residential house and other one is available under Section 54F in respect of LTCG on sale of any asset other than a residential house. Capital gains exemption under Section 54F can be in respect of any land, commercial property or even shares companies whether listed or unlisted etc.
For claiming exemption under Section 54F one of the condition to be satisfied is that you should not be owning more than one house other than the one which in which the investment is being made. So in case you already own two houses on the date of sale of the asset subject matter of sale, you are ineligible to claim this exemption. It may be noted that no such pre condition of owning a particular number of houses is prescribed under Section 54 in case the capital gain arises from sale of a residential house and you want to claim exemption by investing in another house.
Deduction in respect of Repayment of Principal of home loan
You can claim deduction for principal repayment of home loan, taken for residential house from specified entities like banks, housing Finance Companies, Central Government, State Government etc under Section 80 C upto Rs. 1.50 lakhs. This limit is a consolidated limit together with other eligible items like LIP, EPF, PPF, ELSS, NSC, tuition fee etc.. The benefit for deduction of repayment of principal amount of home loan can be claimed for any number of home loans within the overall eligible limit of Rs. 1.50 lakhs. In case of home loan taken for an under construction property this benefit can only be claimed from the year in which construction is completed or possession is taken.
Deduction for interest on money borrowed for buying/constructing a house
The deduction in respect of interest can be claimed for any number of properties. It is available from the year in which the possession is taken. The interest paid during the construction period can be claimed in five equal installments starting from the year of possession. Till last year the tax laws allowed you have one house property as self occupied and deduction for interest was available for one such property upto Rs. 2 lakhs. By the interim budget 2019 the limit for self occupied house which one can have has been increased to two but the overall limit of interest which can be claimed remains Rs. 2 lakhs whether you occupy one to two houses for self occupation. In case you have more than two self occupied property, you have to opt any two properties as self occupied and then the other property/ies are deemed to have been let out and you have to offer notional rent for tax which the other property can fetch in the open market. For upto two self occupied properties this value is nil. For the properties which are let out or deemed have been let out, there is no limit upto which interest on money borrowed for house can be claimed but there is limit of Rs. 2 lakhs for losses under the head “Income From House Property” which can be set off against other income. However the losses which remain unabsorbed can be carried forward to next eight years to be set off against income from house property.
So from the above discussion it becomes amply clear that instead of buying multiple houses in your own name, it makes sense for you to buy houses in the name of different family members.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on tweeter.
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i want to transfer my house in the name of one of child by way of a will after my death. What will be the tax implication for child ?
I have a small building in 20×30 site, consisting of three small individual houses. All let out to separate tenants. Construction Housing loan is one and property tax paid is one. If I use ITR-2, I will have to divide housing loan and property tax to all the three houses, which is not possible, because its calculated as a whole. But, if I use ITR-1, I can easily include pre-moratorium interest, HL interest, Property tax, etc., without breaking up….. I can also include all the three houses rent as one. Now, Is this building (with three houses) deemed as ONE house property or THREE house properties? and Hence, Is using ITR-1 instead of ITR-2 correct?
I have sold two houses and bought a bigger house within one year. Total LTCG from two houses is less than amount invested in new house. Are there any LTCG issues here.
I have a separate question. If a proprietor(individual) reside in a rented house he can claim deduction up to Rs.60000/- for the rent . However it required that the proprietor is to file declaration in the Form 10BA. Question is, how to upload this 10BA Form in the Income Tax site?
At present I am staying in flat A.I have booked flatB under construction, in Dec2018 by making full payment, the possession of which will be given in Dec2019. My query is if I sell the flatA in March 2020,I.e.after getting the possession of the flat B,whether I will get the benefit of sec 54, on LTCG for flatA,if the cost of the flatB is more than the LTCG of flat A? is there any other way to save LTCG tax on flats?
There is no comments on the taxability of Number of Houses you own whether it is let out or deemed let out
I have two self occupied houses with loan from banks and I pay interest for those., one in my native for my parents and other in another city where I work and occupy myself.
Also I have let out houses with loan from banks and I pay interest for those..
So please clarify whether I can claim Rs. 2lacs for self occupied houses and another Rs. 2 lacs for let out houses.
You could have also covered the rental implications in respect of tow or more houses some of which are vacant throughout the year