Income Tax Benefits/Deductions on Second Home Loan

From FY 19-20 onwards in the Finance Act, 2019, government has allowed a major relief u/s 23 and 24 of the Income Tax Act, 1961 by allowing the taxpayers to declare in their tax return the value of their ‘Two’ houses as self –occupied, on a NIL basis. That means, now a person can enjoy the benefit of “NO TAX” in respect of his two owned house properties.

Now let us understand the impact and its benefits that we can claim if we have obtained any loan for the acquisition / construction of the second house property:

Under Section 24 of the Income Tax Act, 1961, vide Finance Act, 2019, an amendment has been incorporated “the aggregate of the amount of deduction” so as to include the payment of an interest made by a person w.r.t his/her owned house properties.

Let us understand the above amended section 24 of the Income Tax Act, 1961 though a below mentioned table:

Note: Any interest pertaining to the period prior to the year of acquisition/ construction of the house property shall be allowed as deduction in five equal instalments, beginning with the year in which the property was acquired/ constructed.

Apart from the above mentioned interest benefit deduction; additional benefits are also there for a loan taken by a taxpayer for his /her house property. Let us also understand the same though a table given hereby below:

Note: The above tax deductions are per person and not per property. So in case of joint ownership in house properties, each person repaying the amount would be eligible to claim whole deduction separately subject to the actual payment incurred in relation to an interest and Principal.

Note: For claiming the above tax deductions, interest certificate with proper bifurcation of the Principal and Interest paid in the financial year will be required along with the loan sanction letter.