If a person buys a second house, will he get tax exemption on the loan taken for it?Yes, you can get tax deduction on repayment of loan. Even if the second house is vacant, it can not be treated as self-occupied since that status is given only to one house.
The tax department requires that you pay tax on the notional rent on at least one of the houses. Notional rent is the rent you would have got had you given your house on rent. As an owner of two houses, you can choose any one of the two houses as a “self-occupied property” and the other will be taxed on the basis of notional rent. You can also change your choice from year to year.
The income from such a home will be calculated after deduction of the interest payable on the loan as well as a standard deduction equal to 30 per cent of such notional rent. Since this house is treated as being rented out, for income tax purposes, the deduction for interest is not limited to Rs 1.5 lakh in respect for the loan taken for this house.
The income or loss from the second house, calculated separately as above, is aggregated with the loss arising due to the deduction of interest payment in respect of the first house and the net result (which can either be income or loss) is the “income from house property” (as earlier, if it is a loss it can be set off against other heads of income).
The entire principal paid on both the loans will be eligible for deduction under Section 80C, subject to the overall cap of Rs 1 lakh.
