How to avail tax benefits on second home loan
By Pradeep Mishra
Owning multiple properties is a dream for many individuals. If you already have a home loan and are considering taking a second one, it’s important to understand the implications and potential tax benefits involved.
The first step is to assess your financial situation. Lenders will carefully evaluate your ability to comfortably manage two concurrent home loans. Factors such as your age, income, repayment history, and other necessary documentation will be taken into account. It’s crucial to demonstrate that adding a second home loan will not exceed the recommended Debt-to-Income Ratio (DTI), which is typically set at 50% of your monthly income for safer side. Meeting the eligibility criteria and maintaining a healthy financial profile will increase your chances of securing a second home loan.
When it comes to tax benefits, the good news is that you can avail them on both your first and second home loans. Under the Income Tax Act, you can claim deductions on the interest paid and the principal repaid on both loans. However, it’s important to note that the total deductions you can claim are subject to specific caps. Currently, the maximum deduction for interest paid on self-occupied properties is Rs 2 lakh per annum, while there is no capping on the deduction for interest paid on let-out or deemed let-out properties. The deduction for principal repayment is also subject to a maximum limit of Rs 1.5 lakh under Section 80C of the Income Tax Act.
Also Read: Buying a house? Neglecting these factors can prove costly
To maximize the tax benefits available to you, it’s advisable to carefully plan your loan structures. For example, you can consider designating the property with lower loan interest as
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