Buying a house is what Indians are obsessed about. And some stretch this obsession to buying multiple houses. Even if it means being neck-deep in loans and then servicing them for years.
But nevertheless, people do buy homes for personal use and at times as investment or for rental income. And mostly, they buy real estate using home loans. And there are home loans tax benefits that further attract such buyers. More so as home loan rates have fallen and increased the affordability of real estate these days.
Many have questions like – I have taken two home loans. Am I eligible and can I claim income tax benefits on both loans or not?
The answer is Yes. You can take a second home loan and you can get tax benefits on two home loans as well.
In fact, under the current income tax laws, there are no restrictions on the number of houses for which you can claim the tax benefits for multiple home loans. So it’s not just about tax benefits on home loans for 2 houses. You can have more as well and claim the benefits. So you can get income tax benefits on a third home loan as well. That is assuming the bank is willing to lend you so much.
Only thing is that you will need to identify each property as either Self-Occupied Property (SOP) and Let Out Property. As of now, you can treat only 2 properties as self-occupied while others will be deemed let out.
The benefits available on multiple home loans come under the regular sections 80C and 24B.
Under Section 80C, no matter how many home loans you have, or in this case, the deduction allowed for repayment of two home loans is restricted to Rs 1.50 lakh. Remember that this limit is also competed for by other tax-saving instruments like EPF, PPF, life insurance, etc. So if you take one home loan, the limit is Rs 1.5 lakh for the principal repayment tax rebate. Even if you have a second home loan, the maximum deduction for principal payments will still be Rs 1.5 lakh.
Under Section 24B, you can claim additional tax benefits for home loan interest payments. But irrespective of the number of self-occupied houses on which you have taken the home loans, the interest deduction for both houses taken together will be restricted to Rs 2 lakh per financial year. But even though you are allowed to claim the full interest paid as a deduction but the loss under the house property income shall only be allowed to be set off against other income up to Rs 2 lakh every year and the excess loss shall be carried forward for set-off against house property income in next 8 years.
The above tax benefits available for 2nd home loan are for each (per) person basis and not on the basis of each property.
Note 1 – If you have taken a loan for an under-construction property, then things are different and your tax benefits will be delayed till the time you get your property possession. Do read about tax benefits on under-construction house.
Note 2 – If you have purchased a property and taken home loans jointly, then you need to be careful with the tax benefits you claim. Do read about joint home loan tax benefits.
I must mention here that even though the proposition of taking multiple home loans to buy several properties seems attractive (as you might imagine yourself as a sort of landlord or property mafia), the fact is that you should never go overboard with your borrowings. Banks have this unwritten rule to limit the loan to an amount so that the monthly EMI are not more than 40% of the monthly income of the borrower. So that is what will define your ability to take multiple home loans and more importantly, your ability to pay back the loans without burdening yourself too much or prepaying home loans to become loan free soon.
So that is how to claim tax exemptions on second home loans (2022). I hope you got the answer to your questions about can I get tax benefits on two home loans and how many home loans are eligible for tax exemption.
Income tax on 2nd house property or tax benefits on second home loan 2022 isn’t exactly tough to comprehend once you get the hang of the basics.