People are generally under the impression that one can own any number of properties but one cannot take more than one home loan at a time. This is not true. As there is no restriction on the number of properties you can own, there is also no restriction on the number of houses for which you can take home loans and claim tax benefits. The amount of home loan that you can take, for all the properties taken together, shall depend on your earning and your ability to service the loan.
Tax benefit on interest payment
You can claim deduction for interest payable on a loan, taken for purchase, construction, repair, or renovation of any property under Section 24b. In case you own only one residential house property which is occupied by you, the maximum deduction that can be claimed on interest repayment on a loan for that property, is restricted to Rs 2 lakhs per annum. However, in case the money is borrowed after 1st April 1999 and construction of the property is not completed within a period of five years from the end of the financial year in which the money was borrowed, the deduction in respect of the interest claim shall be restricted to Rs 30,000 only.
In case you have let out any property or properties owned by you, you can claim deduction for the entire interest paid, without any upper ceiling against the rent received in respect of each such property. However, in case you own more than one house property and more than one houses are occupied by you, then, you have to choose any one property as self-occupied and the other property/properties are treated as let-out for which a notional rental income, based on the rent the property is expected to fetch, is required to be offered for taxation. So, once any such property is treated as let-out, you can claim the tax benefits for full interest paid, for money borrowed in respect of any of the property that is treated as let-out.
This deduction on interest payment is available, for any residential or commercial property owned by you. It is also available, irrespective of whether the money is borrowed from a bank or housing company, or from friends or relatives, for the purpose of repairs, purchase construction, reconstruction, etc.
Any interest paid during the construction period can be amortised and can be claimed in five equal instalments, beginning from the year in which the construction is completed and possession of the house is taken.
However as per the amended law w.e.f. April, 1, 2017, the aggregate of loss under the head ‘Income from house property’, cannot be set off by more than Rs two lakhs against other income for a year. Any loss remaining unadjusted, can be carried forward and be set off against income from the same head, for eight subsequent years.
Tax benefit on repayment of principal
As per the provisions of Section 80C, you can claim up to Rs 1.5 lakhs for repayment of housing loan taken from specified institutions, including cost of registration and stamp duty of a residential house. Although you can take home loans for more than one property, the amount of deduction shall be restricted to Rs 1.5 lakhs. The overall amount of deduction, includes other items like provident fund contribution, life insurance premium, tuition fees, PPF contribution, NSC, ELSS, etc.
This deduction can be claimed only after you have taken possession of the property. If you have started repaying the principal of a home loan before taking possession, this benefit is not available to you. Please note that repayments of loan taken from your friends and relatives, are not eligible for this deduction.
(The author is a taxation and home finance expert, with 30 years’ experience.)