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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8 Comments

  1. Manmohan says:

    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.

  2. Dilip Kumar Pal says:

    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?

  3. Hasmukhsheth says:

    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?

  4. selvaraj says:

    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.

  5. sriram says:

    You could have also covered the rental implications in respect of tow or more houses some of which are vacant throughout the year

    1. vswami says:

      Yes; would have been useful.
      Also, it would have been useful had the learned CA shared his viewpoints on the following additional points of common concern: , –

      On, –
      A) Timing of sale of old asset for reasons, if any, other than that referred to in D) below ;
      B) Utilisation of sale proceeds of old asset for repayment of home loan taken for new asset;
      C) Other points of concern, arising out of the professed suggestion to purchase not in own name but to purchase in …and
      D) Why to avoid sale of two assets in the same (TAX) previous year.
      Await guidance !

      courtesy

    2. vswami says:

      ADD-on:
      E) Change in BASE YEAR- INdexation- Issues/non-issues; and
      F) Why should there be no taxtion of ‘notional income .
      May be, any other, experienced by the rest,, in a case to case basis !

      (For hints/input provided, refer the comments similarly posted earlier ,from time to time )

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