What are the tax benefits of buying a second home?

Buying your first home remains the most awaited dream of any individual. But what about buying a second home? Is it a good option to invest money in a second house/ Are there any tax benefits that a person can avail of if they purchase a second home? The real estate industry started to bloom after the pandemic, especially in Hyderabad. Many flats for sale in Kukatpally, and you may consider buying a second home here if you are planning to invest or move. So, is it the right time to take the big decision yet again? Let’s take in the facts!

Types of House Properties:

An individual can purchase a house property for two purposes:

● Self-Occupied Property (SOP) or

● Rented Property

A property that is used or occupied for personal residential purposes is called SOP, and the property that is lent out for rent is called a rented property. In cases where the property is not self-occupied or rented, it is considered to be deemed as a rented property under the tax law. Flats for sale in KPHB are increasingly bought for the tax benefits one can avail on second home loans.

Taxation standards:

● Self-occupied property: The annual value of an SOP is summed to be nil. Thus, taxation does not apply to the annual value.

● Rented property: The same is not the case with a lent-out property. It is subject to taxation under the form of ‘income from house property.’ In cases where the property is not self-occupied or rented, it is deemed to be lent out, and a notional rent value is calculated as gross taxable rent.

● Third property: In cases where the first and second houses have been rented; and the person stays in a third property, both the houses will be taken into the purview of taxation.

● Joint Ownership: If a property is jointly owned, taxes will be split between both individuals based on the ownership value.

Also Read: Luxury Residential Apartments in Bachupally

Taxation benefits on a home loan when buying a second home:

When individuals buy a second home under their name, they are applicable to tax benefits and deductions from the government. Deductions on the principal amount of the loan under Section 80C are not applicable on second homes. However, one can avail of tax benefits on the interest subject to the loan. Hence, we can buy flats for sale in bachupally with home loans.

In the past years, the interest on home loans of second homes was completely deductible. It is now limited to up to 2 lakhs INR. This means that the difference between the rental income and the interest of a second home loan is considered other income sources (up to 2 lakhs INR). This difference in the value is carried forward for eight years and is adjusted under the head ‘income from house property’.

Conclusion:

Along with the positive aspect of an investment plan, buying a second home can be advantageous for you in many other ways. Securing a home loan for such a purchase can help you avail plenty of tax benefits. Hence if there are flats for sale in Hitech city and you are planning to buy a second home, then you can definitely go for it and claim substantial tax benefits.