People buy a second home for many reasons, which, inter-alia, include as an investment for capital appreciation; to use it as a holiday home; to get a regular stream of income by way of rentals; or to diversify their investment portfolio.
However, it is important for an individual, who is planning to buy a second home, to understand the tax implications under the Income-Tax Act 1961 of owning and maintaining the second home.
Page Contents
Second House is Self-Occupied
If an individual owns more than one house property for his use, then under the provisions of the Income Tax Act, 1961 (the ‘Act’), any one property as per his choice is treated as self-occupied and its annual value is computed to be nil. The other house property is deemed to be let-out and a notional rent as per the provisions of the Act is computed as the taxable income under the head ‘Income from House Property’. In other words, the second house is treated as being rented-out and its estimated rental income is treated as taxable income.
Even vacant house has tax implications
If you own more than one Self Occupied Properties (SOP), you have a choice to treat any one of the properties as SOP. The other such property (ies) which lies vacant will be treated as Deemed Let Out Property (DLOP) under the Act. If a property is treated as a DLOP, it is effectively put at par with a let out property as far as taxation is concerned. Hence, a notional rental value (method to calculate such value prescribed under the Act) is considered as the gross taxable rent for such property. You are allowed to claim a flat deduction of 30% for repairs and maintenance charges.
Second home is used as a holiday home
As the benefit of self-occupied property is available for only one home, the estimated annual rent will be considered as the taxable value.
Second House is Let-Out
If the second house is let-out to a tenant, the actual rent received, subject to certain conditions, is treated as the taxable income under the head ‘Income from House Property’.
Deduction for Municipal Taxes
The taxes paid to the local authority, generally the municipal taxes, are allowed as deduction in the financial year, in which such taxes are actually paid. This is irrespective of whether these taxes pertain to the current financial year or the earlier year. Therefore, an individual should keep a track of the municipal taxes paid and claim this deduction accordingly.
Deduction for Repair & Maintenance
Further, a sum equal to 30% of the annual value of the house property is allowed as deduction towards repair and maintenance charges. It is pertinent to note that this deduction of 30% is a fixed percentage, irrespective of the actual amount incurred by the individual i.e., irrespective whether an individual incurs more or less amount, he can only claim a deduction for 30% of the annual value of the house property.
Interest Deduction
Whether the second house property is deemed to be let-out or actually let-out, the actual interest paid on the housing loan is allowed as deduction. This is contrary to the case of a self-occupied property, wherein the maximum interest on housing loan is restricted to Rs 150,000 p.a. ( 2 Lakh from AY 2015-16), subject to certain conditions.
Please note Till FY 2016-17, loss under the head house property could be set off against other heads of income without any limit. However, form FY 2017-18, such set off of losses has been restricted to Rs 2 lakhs.
Effectively, if Assessee owns more than one house property & is kept for own use,
- one house property, as per the choice of the Assessee, shall be treated as self occupied house property and the annual value shall be treated as Nil.
- Other house property shall be deemed to have been let out and the tax is payable on notional rent as the property is deemed to have been let out and is taxable on the basis elaborated above.
In respect of such deemed let out house property, one can claim interest as deduction u/s 24(b) without any monetary limit. Please note Till FY 2016-17, loss under the head house property could be set off against other heads of income without any limit. However, form FY 2017-18, such set off of losses has been restricted to Rs 2 lakhs.
However, for the second house property, no deduction is available for repayment towards the principal portion of housing loan under section 80C.
Image courtesy of sscreations at FreeDigitalPhotos.net
(Republished with amendments on 29.06.2018)
Author Bio
Thanks for such a wonderful blog, the article is very informative!
SIR, WHY 80 REPAYMENT OF PRINCIPAL AMT DEDUCTION IS NOT AVAILABLE IN CASE OF DEEMED TO BE LET OUT HOUSE PROPERTY?
Sir,
I have constructed a house long ago and is registered in my name. This is used for my own family dwelling purpose, SOP. If I buy a flat now , second house property, for our own family use as the 1st house is insufficient and the flat is registered in the name of my wife who is a housewife, can it be taxable in my hands as DLOP ? Please advise.
Thanking,
Sir,
I Have constructed a house 20 years ago and am living in this house for 20 years. At present I intend to buy a flat for my own use. The flat ( second house property ) is taxable. My question is , how the notional rent / fair rent will be calculated. I will not let it out and will use for my own living. Can the Annual Value ascertained by the Municipal Corporation and shown in the tax bill sent to me annually by the corporation be treated as the Notional Rent ? Annual Value amongst others also means ,Notional Rent ‘ Please advise.
Sir, I read your article on taxability of second house. Sir my second house is vacant for the last 10 years. I pay property tax of Rs.1713/- The annual value of the flat in property tax receipt is given as Rs.28,000 (approx). I never included this in my taxable income which I should have done w.e.f. 2010 as I purchased my another house. I want to start a clean slate on tax front. Can I include Rs.28,000 as my deemed rent for current FY?
Hi, My mother is having 2 flats in different locations. One is self occupied & other is let out. Now another flat which both me & my mother are purchasing as joint owner & scheduled to be completed by 31st March 2018. Now due to some official issues, I am thinking to register that flat Only in my mother name, then what will be the tax implication, wealth implications on that new flat (3rd one for her) ?
Another doubt, can we claim deduction of the municipality tax that we pay annually in income tax? If yes, under which section can she claim deduction in Income tax?
My client has 2 house 1st house name of his mother and 2nd own name. but currently my client is living with his mother so 2nd house is vacant .WHETHER 2ND IS DEEMED TO BE LET OUT OR SELF OCCUPIED PLEASE GUIDE ME.
THANKS ‘
REGARDS
JAYDEV MODI
Dear Sir,
I have purchased the second flat on 12 Sept 2016. I have sold my old flat on 26.5 lac ( 12.42 lac purchase in April 2010) on 2.03.17. Could you please let me know what are the implications in the Income Tax.
As on now I am living in Second flat and am salaried person.
I own 2 House Properties. 1 in my name and the other is jointly owned by my Son. I reside at Property 1 which is owned by me (SOP) and my son resides at Property 2. Will property 2 be considered as DLOP for me? If yes till what extent?
Also can my son claim it as his SOP and still do I need to consider it as DLOP?
One of my client has own house in goregoan & has given it on rent since his office is at mulund & it is very difficult for him to travel from goregoan to mulund. He is currently living in thane on a rented flat.
Also he had booked a flat in thane & has got a possession of flat in last month (i.e. Jan 17).
Both the Properties are brought on loan
Now my question.
1. Can he get HRA Exemption against the rent paid for the rented house at Thane.
2. Can he get the Full Interest benefit for both the house at thane & goreqoan considering rental income to be added while computing Income Tax
I have one flat self occupied flat in Pune which loan has cleared last financial year.
I want to buy one more flat in Pune by taking loan from SBI. The new flat will be SOP and current one will be rent out.
Please guide me what is the benefit of income tax. How much Interest benefit?
Hi
I have two flat. On first flat I am staying and taking house lease by company. Second flat given on rent and also I have taken loan on it only.
Pl clarify me for income tax benefit and tax liabilities.
I am living in my own home in Delhi. I have at present my loan. I want to purchase a flat in Gurgaon and i want to take Home loan. Can Home loan Interest be exempted from Income tax.
I have one home loan and now has still to pay Rs.1100000/- in next 17 yrs.. and my salary is now Rs.68000/- .. should i increase my EMI from 11925 to 28000/- to finish it by next 4 yrs or should i go for purchasing a new house with out closing the home loan account… i want a bigger house now looking at the new needs of family.. pl suggest
I have home loan in bangalore(karnataka) and it is self occupied. I am planning to let it for rent and move to rent house because of travelling time taking for me to reach office.
Now I am planning to buy another home (with 4 flats) at my native(andhra pradesh). Here my parents will stay in 1 flat and remaining will be rented out.
Can you tell me in what way i can get maximum tax exemption?
In case one person owned two house properties (“A” with MV Rs30 Lacks & “B” with MV Rs70 Lacks) at different cities (“X” & “Y”) and house loan taken for both, in such case the person is living property B in Y city. Will there be any obligation if the person claim Property B as Deemed to Let out and Property A is self-occupied? Or since the person living in Property B it will has to consider as Self Occupied and Property A would be Deemed to Let out?
Thanks.
Hi
It was nice article. I have one doubt on rental income and taxation of second home loan.
We recently bought the second house jointly (Me + my mother).
since My mother is housewife and don’t have Income I want to give the rental income on new home to her.
At the same time I am the one who pay the EMI on the same can I claim the 100% interest on the home loan and 0 Rental Income.
Thanks in advance,
Regards,
SRinivas Srikanth V
My brother is having a house in Gurgaon in joint name and also home loan in joint name. Now he is planning to buy a new house. I want to know the tax implications and also want to know how he can get maximum benefit from Tax
Thanks
Bhavisha
My brother has a house in Gurgaon in joint name with wife and also joint loan for the said house. Now he is planning to buy a second house. I want to know the effect of tax for the second house. What are the tax benefits he can get
Thanks
Bhavisha
I am staying at Thane on rent @ 20000 per month. I had one flat in Pune on which home loan is going on. Annual interest is around 1 lac. Now, I am planning to buy second flat (Ready to move) in Ahmedabad city and will be rented out. Can I claim Tax Exemption as per following.
1. HRA Exmpention on Rental flat at Thane
2. Pune Flat Principle and Interest (1.5 lacs cap) as a first home.
3. New Ahmedabad flat . zero Principle and completer interest amount (No cap) as a second home.
Regards,
Ravi
I have a house in Delhi which is vacant/self occupied. I have purchased a house in Chennai after retirement taking bank loan of Rs 30 lacs thru Court auction for 55 lacs in April 15 1nd possession was handed over to me in August 2015. Please clarify how to claim Income tax benefit to be most beneficial and what is going to be my wealth tax liability?
Secondly If I rent out my Delhi flat, how will it affect my Tax liability?
Sir, I have a property at Coimbatore where my dependent parents are staying. I claim IT relief for the same. I am working and staying in Chennai and getting HRA also. Now i bought a house in Chennai for self occupation which is under construction. It will be handed over by Oct’16 and I am paying pre-EMI for the loan amount. Can I claim tax relief for my second loan also, what is the procedure? Kindly help me to understand the prevailing rules on this. Thanks and Regards.
Hi, I stay in Pune. I have one flat in Nagpur which is empty as of now and has small home loan. Now I am planning to buy home in Pune and it will have bigger home loan. So is it legal to show my nagpur flat as SOP and the one I would be buying as let-out? This way I would be able to save lot of tax.
Sir,
I own , two residential flats. I live in one flat and the other is rented out. Both flats have housing loans and are being repaid. However, the flat i live in has big housing loan, and therefore big interest outgo, whereas flat i rented out has small loan and small interest outgo. with a view to aviling tax benefit of interest deduction under house property loss, I wish to show the rented flat as self occupied and flat i live in as rented out and avil tax benfits. Is it possible and allowed under the income tax rulles.
Sir,
I have two flats on my name at Hyderabad. One flat is let out and there is no loan on this property. The second flat is self occupied and some loan is left out with the flat in SBI. Now, I would like to purchase a third flat at Bangalore on bank loan and may/may not be let out. Kindly advise me on the tax implications.
Thanks,
Regards,
Ramesh
Hi,
I bought one 2BHK for me in March 2015. (Home loan of 35 Lacks).
Then I bought another 1BHK with my brother in Nov 2015. He is owner & I am co-owner. (Same applies in borrower & co-borrower in home loan – 23.5 Lacks Loan).
I am going to get possession of both flats in next 2 weeks.
I am paying full EMI of first home loan.
For second home loan , I am transferring some amount of money to my brother’s account as ECS for second loan is applied on his account.
So how can I get tax benefits in this case?
Thanks,
Bharat
Dear Sir,
Currently I living in Ankleshwar-Gujarat in my mother house.
I have purchased one home in Vadodara-Gujarat in my name & second home in my father’s name with second name in mine as my father is retired person.
Can I get full Tax benefit of Interest & Principle repayment for the same.
Sir,
I bought property in bhopal in 2007 which is self occupied by parents and am paying EMI around 12K per month in which interest around 1 lac & taking tax benefit for same for both principal and interest.
Recently have bought flat in pune which is also self occupied for which am paying EMI around 50K per month. My Query is how can i take maximum tax benefit from 2nd home loan. Can i show 2nd home loan as self occupied?
Please suggest
Thanks
Dear Sir,
I have two properties. I live in the property in Pune against which I pay interest again loan too. the second property is in Delhi and is on rent of 30K /month. The rental value of the Pune house is lower at 16-18K/ month. Can I show House in Delhi as Self occupied and the Pune one with notional rent ?
I’m already paying EMI on the first flat. Is it advisable to own second house to avail Income tax benifits?
what are the implications of owning second house as per IT rules?
RESPECTED SIR,
I HAVE SELF OCCUPIED HOME AT KOTA RAJASTHAN. I WANT TO PURCHAGE ANOTHER HOME IN SAME CITY BY BANK LOAN.CAN I CLAIM ITS INTRES AND REPAYMENT INSTALLMENT FOR TAX REBATE.
KINDLY REPLY ME BACK.
THANKS.
I took a home loan in my living city, but I want second loan in my native’s property. I want to know that can I take tax benefit on both loans and How?
Hi,
Presently I am based at Pune and residing in rented house and claiming HRA benefits.
I owned a house at Delhi which is self occupied presently and same was purchased in 2010 through Housing Loan.
I also booked one flat during year 2012 at Noida which is ready for possession, second flat was also purchased through Housing Loan.
I want to foreclose loan of my first Delhi house as I can’t afford EMIs of both House.
I will declare my second house as let out for purpose of income tax benefits and claim complete interest.
Now my question is that to claim “Income/Loss from House Property” for second let out property, is loan on First self occupied property is compulsory or not.
Regards,
Lalit Goel
I have flat after availing Bank loan in Kolkata and have been availing interest and instalment reliefs. I have another flat jointly owned by three family members (My investment is Rs12lac and 20% is my share)in Bangalore after availing Bank Loan.Both the properties are occupied by our family members and not let out. I am a pensioner and use to reside in both the houses for my rest and recuperation. I have pension and inerest income.
Query :
*Whether both the houses are classified as self occupied
*Whether interest paid in bank loan can be availed as interest relief from tax.
*Whether Ishould be outside perview of wealth tax as my investment is below Rs30lac
I have a house in mumbai self occupied. We have purchased a flat in pune in joint name of myself,my wife and my son all three have contributed towards cost but not equally. Will it be taxable? If yes how to ascertain annual value the property is located out side pune municipal limits in a village. My wife is house wife with no taxable income,can each one of us has to show one third value in our return? Pl guide,thanks
Hello Dear Sir/Madam.
I am Mr. Austin, a private money lender. I give out loans with an interest rate of 3% per annual and within the amount of $1000.00 to $500,000,000.00 as the loan offer. 100% Project Funding with secured and unsecured loans are available. We are guaranteed in giving out financial services to our numerous clients all over the world. With our flexible lending packages, loans can be processed and funds transferred to the borrower within the shortest time possible. We operate under clear and understandable terms and we offer loans of all kinds to interested clients, firms, companies, and all kinds of business organizations, private individuals and real estate investors. Just complete the form below and get back to us as we expect your swift and immediate response. EMAIL : [email protected]
Attention!!!
Do you have a bad credit?
Do you need money to pay bills?
Do you need to start up a new business?
Do you have unfinished project at hand due to bad financing?
Do you need money to invest in some area of specialization which will profit you? and you don’t know what to do.
We offer the following loans below,
personal loans[secure and unsecured]
business loans[secure and unsecured]
combination loans
students loans
consolidation loans and so many others.
1. Full Names:……………………….
2. Contact Address:…………………..
3. Loan Amount Needed:………………..
4. Duration of the Loan……………….
5. Direct Telephone Number:……………..
Email [email protected]
Best Regards,
Mr Austin
dear sir
I am having house loan, now principal is equivalent to my pf amt. shall I close the loan amt against PF. and go for 2nd house. Is it worth to go against the pf amt.
pl advise – benefits and implications. Considering my age factor(around 42).
I am having a own flat at Pune(shown as occupied) and for this I am claiming IT benefits (principle + Intrest both)
I am working in Navi mumbaiand planing to buy resale flat in NAvi mumbai, which will be Co owned by Wife & me, wife is non taxpayer, pan card holder.
The new flat will be occupied.
My queries
1. Can I get IT benefit for 2nd house on Resale flat(or it can be claimed only on New Flat),
2. If yes, how I can claim complete benefit on both the flats.
Please suggest.
Thank you.
Dear sir, I have 1 flat in Pune ( showing self occupaid ) and claiming IT benefit for Principle as well as Intrest.
I am working in Navi Mumbai and now in process of purchase of resale flat in Navi Mumbai, My wife is first owner & I am co owner, We will be staying in Flat at Navi Mumbai. Wife is non tax payer. Following are the queries.
Can I get benefit on Resale flat or it has to be New flat only?
If yes for above, then how I can claim complete benefit on both the flats?
Please suggest.
1. I have taken one home loan and house is located in native place far from bombay, so i have declared as selfoccupied
2. i am planing to take another home loan (flat) which is in bombay, i want to stay in flat, can it be declared as letout property
I am a salried emloyee of PSU .I have purchased one flat in the year 2006 ( I am the registered owner of the house ) and claiming IT deduction on interest on loan .
I have purchased a flat in April 2015 . Registered owner of the house is my wife . I have Taken Housing loan . My wife ( House wife with no source of income )is borrower and I am co-borrower . The Loan is sanctioned on my income criteria and I will pay all EMI .
Am I eligible for IT deduction on Interest to be paid on Flat purchased recently ( i.e in April 2015 )
Regards
Pranav Kumar