Homeownerships in India have certain complex attributes, especially when it comes to tax benefits if you have a second home loan. Read the following article to know more tax benefits pertaining to home loans
The current economic trends have definitely proved one thing, that investing in a property in India is worth the effort, because it is bound to yield good results in the near future. It is impossible to avoid or ignore the real estate market of India. With world economic pressure growing up and the Indian property market also presenting a somewhat bruised but resilient front on the whole.
Homeownership in India
The overall Indian residential real property market remains in a subdued maintenance mode. However, this does not imply that demands have died out. Demands are enjoying a growth and houses continue to be sold. Most importantly, owning a house of their own or homeownership is extremely significant for Indians. While market conditions can oscillate, the basic requirements of human conditions still remain relentless. Therefore, for both practical and traditional reasons, the urge or the strong desire to own a home continues to linger in the Indian psyche.
Home Loans and Tax Benefits
It should be understood that the concept of home ownership for investment purpose has steeped in much later and is a much recent phenomenon among Indians. Thus, in almost all cases, middle class Indians end up borrowing loans in order to buy homes. However, these days’ many Indians, especially those belonging to the IT sector are investing in their second homes. It should be borne in mind that returns available from real estate as an investment avenue is just second to equity and in order to make it all the secure, there are home loans that assist one through the entire process of homeownership. Let’s take a look at the income tax benefits available on a second home loan in India.
Before progressing it is very important to understand the basics of the ways single home loans operate. Try and understand the concept of annual value of a housing property and how it is calculated. Keep in mind that this figure processes the sum of money for which your house might be expected to be let out each year. Also make note of the fact that the annual value of the house that you put up is actually nil.
Once you have figured this out, then you will be able to figure out how the income from the property can be calculated. If you have let out the house, you will receive rent and then depending upon the income earned, you will be able to calculate the amount of rent received and then pay the percentage of tax imposed upon the same.
For a solitary home loan, that you might have, the principal amount is allowed as deduction to an upper limit of INR 1 lakh and an interest amount of INR 1.5 lakhs.
Now what do you do when you two home loans?
One residential property need to be considered to be on rent and the other, most essentially needs to be self-occupied. You can pick up any up any of the properties for a resolution of investment. It does not really matter whether or not the tented property was securing a good amount of money – you will have to pay certain amount of income tax even if you have not received any rent from the same.
Here arrives the question of self-occupancy. In which house should ideally the owner invests? Understand that the principal module of tax savings is not considered instead only the interest component of the major home loan is considered.
In the latest Indian budget, the offer of tax breaks on home loans has definitely brought about some major tax relief for home buyers in India. Such moves are expected to boost the real property markets of Tier II and Tier III cities of India.