Own As Several House You Want. But, Know the Tax Angle Around It..!

Being a homebuyer, one should beware of the various tax implications that one may have to face while owning more than one house

Followed by another one, for how many properties one can take a housing loan?

On the face of it, the queries are simple, the answer is even simpler but do tax laws look at this so simply?

Probably not. So, to answer the queries as many as you want, as there is no restriction on the number of properties you can own or / take a home loan either under the banking laws or / the Income Tax laws.

However, there are some tax implications for owning more than one house...!

DEDUCTION IN RESPECT OF REPAYMENT OF PRINCIPAL OF HOUSING LOAN..!

Presently, Section 80 C allows you an overall deduction upto Rs. 1.5 lakh for repayment of the home loan, including any amount paid for registration and stamp-duty of a residential house.

So, you can claim this for any number of housing loans within the overall limit of Rs. 1.5 lakh. This deduction is available together with other items such as life insurance premium, tuition fees for two (2) children, contribution towards EPF (Employees' Provident Fund) , PPF (Public Provident Fund) and NSC (National Savings Certificates), etc.

This deduction can be claimed if the loan has been taken from banks, housing finance companies (HFCs) and other specified entities. Moreover, in my opinion, this deduction can only be claimed after you have taken possession of the property though there are opposite views.

So, in case you have started repaying the principal of a housing loan while the construction is not complete, you can not claim any tax benefits for such repayments.

Interestingly , repayments of a home loan taken from your friends & relatives are not eligible for this deduction.

DEDUCTION FOR INTEREST PAYMENT..!

In addition to the principle re-payment, you can claim deduction for interest on loans taken for purchase construction re-pair renovation of any property under Section 24b. This deduction for interest payment can be claimed in respect of any house property including a commercial property .

In case you own only one residential house property & the same is occupied by you, the deduction available is capped at Rs. 2 lakh. In case you own more than one house property and those are occupied by you, you have to exercise an option to choose any one of the property as self-occupied & the other properties shall then be treated as let-out for which a notional rental income is required to be offered for taxation.

However, in case of a let out property , the actual rent received, is taxable in your hands. In respect of properties which are either let-out or which have been deemed to have been letout, you can claim full interest paid against the notional rent or the actual rent received. This deduction is available even if you have borrowed money from your friends or relatives.

EXEMPTION FROM CAPITAL GAINS..!

Section 54 & 54F allow you an exemption from long-term capital gains if you make investments in a residential house. Such exemption is available in respect of sale of two (2) asset classes. Under the category covered by Section 54, long-term capital gains arising on sale of residential house properties, are exempted if such gains are invested for purchase or / construction of another residential house. There is no restriction as to the number of residential houses you can own as on the date of sale of such house for claiming this exemption under Section 54.

However, in order to claim the exemption under section 54F which covers long-term capital gains on assets other than a residential house, you should not own more than one residential house other than the one you are acquiring on the date of sale of the other asset.

So, if you own more than one house on the date of sale of the asset except the house in which you are investing the long-term capital gains, you can not avail the capital gains tax exemption by investing in a residential house under section 54F.

PROVISION UNDER WEALTH TAX ACT..!

However, as far as tax on value of house property is concerned, wealth tax act provides for exemption of one house from levying wealth tax without monetary value.

However, in case you own and occupy more than one house, you have an option to choose one house as exempt & offer the value of the other house for wealth tax.

All commercial properties are exempt from wealth tax. In case you own more than one house & others have been let-out during the last year for a minimum period of 300 days, then the same is exempt from wealth tax.

In case the value of the second house together, with other assets is not more than Rs. 30 lakh, you do not have to pay any tax as the total value of the assets does not exceed the exemption limit.

Src: TIO

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