Income tax benefits on second home loan — Explained

The income tax benefits in respect of interest on home loans for self-occupied house property/ies as well as for repayment of principal repayment are available only if you opt for the old tax regime and are not available under the new tax regime.

I have taken a home loan in May 2022. I got possession of the flat in March 2024. I will get the income tax benefits in respect of interest paid as well as the principal amount repaid. It is my second house. The house will also be used by my parents. The first house is self-occupied.

The tax benefits in respect of the home loan are available to you from the financial year in which you have obtained possession of the house i.e. financial year 2023-2024. Please note that the benefit for the whole year is available even if the possession is taken on the last day of the financial year.

For the interest paid before the financial year 2023-2024, the same can be claimed in 5 equal annual installments beginning from the year in which the possession is taken by you along with the current year’s interest within the limits applicable depending on whether the house is self-occupied or let out.

As the second house will be used by your parents, the same also shall be treated as self-occupied for income tax purposes. The tax laws allow you to have a maximum of two houses as self-occupied.

In case you have taken a home loan for the first house also, the aggregate of ₹2 lakh of interest can be claimed under Section 24(b) for both the self-occupied houses taken together.

Concerning the deduction of repayment of principal repayment under Section 80C, you can claim the same within the overall limit of ₹1.50 lakh along with other eligible items for repayment of home loan principal in respect of any number of home loans.

Please note that the tax benefits in respect of interest on home loans for self-occupied house property/ies as well as for repayment of principal repayment are available only if you opt for the old tax regime and are not available under the new tax regime.

Balwant Jain is a tax and investment expert and can be reached at [email protected] and on @jainbalwant on Twitter.