Planning to buy second house? Here is how to claim tax benefits on it

Buying a house is always a big event in India. People seem to be obsessed with buying property and mostly, home loan comes to their rescue. It gives you the comfort of repaying the amount over a longer period. A lot of people own more than one house. Some leave it idle while others put it on rent. If you are planning to buy second home, you must know that in both the cases the tax treatment of interest paid on home loan will be different 

In case the property holder is using the house for self-consumption purpose then the gross annual value shall be taken as NIL as per Section 23 of the Income Tax Act, 1961. The notional rent is not taxed in case of second property.  

In such cases, you can claim up to Rs 2 lakh as deduction towards interest on home loan and Rs 1.5 lakh towards principal repayment on housing loan under Section 80C of the Income Tax Act, 1961. However, this benefit is only extended under the old tax regime. In the new tax regime, interest on housing loan and principal repayment on housing loans will not be eligible for tax deduction. 

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Meanwhile, if you decide to rent out the property, the actual rent received is taken as gross annual value of the property and the following expenses can be claimed as deduction: 

- Actual taxes paid to the local authority in respect of such property 

- Interest paid on housing loan on such property 

If the net received is positive after deduction of the above two expenses, then that will be added to the gross total income of the taxpayer and will be taxed as per his slab. The principal amount remains eligible for deduction under the overall limit of Rs 1.5 lakh given in Section 80C.