Are you planning to purchase a second home? A home is more than just a place to live. It is an asset to be treasured. And if you have the resources to invest in a second asset, you should! Therefore, there are other decisions to be made before investing in a house. You've already been paying EMI payments on your present house. Will you be able to get a second mortgage very easily? Consider taking a second home loan
, which will not only offer you a more comfortable living space but will also save you money on taxes. Those who own two homes are eligible for a lot of tax breaks. Although, if you have previously paid off your home loan in full, you will not be eligible for this benefit.
Here are six tax benefits on a second home loan
If you have more than one residential property for your use that is provided in the Income Tax Act provisions, one of the two houses of your choice will be taken as self-occupied and its yearly value will be zero. According to the IT Provisions, the other place will be taken into consideration as a let-out, and a speculative rent will be taxed under the section 'Income from House Property.
2. Tax Implications:
If you own two Self Occupied Properties, you can select to treat one of them as SOP. The remaining house will be considered a 'Deemed Let-Out Property' under the IT Act. If one of your properties is a DLOP, it is considered a rental property. Therefore, a fictitious rental value will be applied to calculate taxable income. Maintenance and general upkeep are eligible for a 30 percent flat deduction.
3. Vacation Retreat:
If you use your second property as a vacation retreat or retirement retreat, then the self-occupied asset benefit is only available for one property. Therefore, the assessed yearly rent
will be classified as the taxable value.
4. Renting or leasing:
If you want to buy a second property to rent or lease, then the actual rent you get will be considered taxable income subject to certain rules. There are some rules in the income tax act that will be applicable to you if you use your other property for commercial purposes.
5. Municipal Tax:
Municipal taxes, in general, are allowed as a deduction in the fiscal year in which they are actually paid. So, whether the taxes are for the current fiscal year or the previous fiscal year it is allowable to deduct. This means municipal tax will be deducted only in the year they are paid.
6. Interest deduction:
If your second property is basically let-out or substantially let out, you can minus the real interest paid on the house loan. This is in the case of a self-occupied property only. This will help you in saving tax as well as making you create another property for the future. This opportunity will make you financially stable and save your tax at the same time.
Procedure to Claim Tax Benefits on second home loan
1. To start with, you have to make sure that both the first and second home loan is in your name. In the case of joint loan approval, you have to make sure that you are a co-owner or owner of both homes.
2. Next, you have to calculate the tax benefit on a second Home Loan prior in order to save time and avoid unnecessary problems in the future. You can also use the home loan tax benefit calculator; it can be available on the official website of many reputed banks.
3. If you are an employee, then you have to submit your Home Loan Interest Certificate to your employer to adjust your TDS calculation. If you fail to do so, then you will continue the regular TDS deduction from your salary without any benefits. Also, you might need to submit your loan Sanction Letter as well.
4. In case you forget to submit a home loan interest certificate to your employer, then you will have to file income tax returns to claim the tax benefits.
Planning to maintain a home in your hometown or buy a holiday home, or planning to make a second income source by renting out your property? There can be a lot of reasons to buy a second home if you want to build or buy a second home and look for trusted lenders to finance the price. Then you are at the right place, and we can provide you with a loan for the second property. If you want to know more information and want to get the best advice then visit Loans Paradise today!