In India, individuals with multiple housing loans on different properties can indeed avail tax benefits for both loans. Here’s a comprehensive guide on how this works:
1. Tax Benefits for Multiple Home Loans:
- The Income Tax Act in India allows homeowners to claim tax benefits on the repayment of housing loans for up to two properties. These benefits are available under different sections of the Act.
2. First Property Tax Benefits:
- For the first property, homeowners can claim deductions on the interest paid on the housing loan under Section 24(b) of the Income Tax Act. As of my last knowledge update in September 2021, homeowners can claim a deduction of up to ₹2 lakh per financial year on the interest component of the loan for a self-occupied property. If the property is rented out, there is no upper limit on the interest deduction.
3. Second Property Tax Benefits:
- For the second and any subsequent properties, homeowners can claim deductions on the interest paid on the housing loan under Section 24(b) as well. However, the total deduction for both properties (first and second) is subject to the same ₹2 lakh limit for self-occupied properties. If both properties are rented out, there is no upper limit on the interest deduction for the second property.
4. Principal Repayment Deduction:
- Under Section 80C of the Income Tax Act, homeowners can claim a deduction of up to ₹1.5 lakh on the principal repayment of the housing loan for the first property. This deduction is applicable for self-occupied or rented properties.
5. Second Property Principal Repayment:
- For the second and subsequent properties, homeowners can claim a deduction on the principal repayment under Section 80C up to the same ₹1.5 lakh limit. This limit applies to all properties combined.
6. Additional Deduction for Affordable Housing:
- Under Section 80EEA, there’s an additional deduction of ₹1.5 lakh available for interest paid on loans taken for the purchase of an affordable housing property. This deduction is available for each property, including the second one.
7. Conditions for Claiming Deductions:
- To claim these deductions, homeowners should ensure that the properties are in their names, and they are co-borrowers or sole borrowers on the loans. The properties should also be used for residential purposes.
8. Caution for Under-Construction Properties:
- Be aware that tax benefits for under-construction properties are slightly different. For an under-construction property, the interest paid during the construction period can be claimed in five equal installments starting from the financial year in which the construction is completed.
9. Consult a Tax Expert:
- Tax laws and benefits may change over time, and it’s advisable to consult a tax expert or chartered accountant for the most up-to-date information and to ensure that you’re maximizing your tax benefits within the legal framework.
Homeowners with multiple housing loans can indeed claim tax benefits for both loans in India, subject to the limits and conditions specified by the Income Tax Act. It’s essential to understand the provisions and consult a tax expert for personalized advice based on your specific circumstances.