How to Claim Tax Benefits on Second House Property as Per Latest Rules?

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How to Claim Tax Benefits on Second House Property as Per Latest Rules?

Property purchasing is considered a decent long term investment in India as it provides tax benefits, capital gratefulness, and rental income. Because of these reasons numerous individuals in India purchase more than one house property. Commonly, individuals fund these property purchases through a home loan. In the event that you have purchased more than one property with the home loan, at that point you can get tax benefit on the second property as well. claim tax benefits on the second or more housing property according to the most recent income tax rules.

From the financial year, 2019-2020 and onwards, income tax rules pertaining to the tax benefit on the second property have changed. In any case, the tax benefit will rely upon whether the second property is self-occupied or rented.

In case the second house property is self-occupied

In the event that an individual possesses two house property and none of them are rented then both the properties are treated as self-occupied and net yearly annual value for Income tax return (ITR) purpose will be taken to be NIL according to Section 23 of the Income Tax Act, 1961. It implies notional rent isn’t taxed. However, prior to the financial year 2019-20, notional rent on the second property used to be taxable.

In such a case, in the event that you have a home loan on both the properties, at that point the total deduction of interest on housing loans from the two properties will be most extreme Rs 2 lakh and the essential reimbursement of housing loan up to Rs 1.50 lakh is eligible for deduction under Section 80C of the I-T Act. On account of self-occupied property, any additional income remaining after deduction of Rs 2 lakh cannot be carried forward nor changed against some other income.

In case the second house property is rented

On the off chance that the second property is let out for rent during the past financial year, the genuine rent received/receivable is taxable as gross annual worth. Be that as it may, a few deductions can be claimed concerning the let-out property. Here is how to calculate the taxable value of rent out properties:

  • Determine Gross Annual Value (GAV) of the property: For rented property, the rent gathered on the properties is considered as GAV.
  • Decrease Property Tax: Property tax is permitted as a deduction from GAV of property.
  • Find Net Annual Value(NAV): Net Annual Value is calculated as GAV less minus property tax
  • Lessen standard deduction: 30% on NAV is permitted as a deduction towards expenses caused for fix and maintenance of the properties according to Section 24 of the Income Tax Act.
  • Lessen home loan interest: Deduct total interest paid on rented properties. The subsequent value is your pay from house property. This is taxed as per the income tax slab of the individual

Treatment of Loss from House Property for Taxation

In the case of self-occupied house property, since the gross annual value is nil, claiming the deduction on home loan interest will result in a loss from house property. According to income tax law, a maximum of Rs 2 lakh loss from all self-occupied properties can be adjusted against pay from different heads. In any case, for let-out or considered to be let-out property, there is no such maximum limit on claiming deduction towards home loan interest.

In the case of let-out properties, if the net annual value after deduction of all home loan interest ends up being negative, such losses can be set off from income under some other head of income during that year, to the extent of Rs 2 lakh. The excess loss if any can be carried forward to the next 8 assessment years. In any case, that loss must be set off against future income from house properties only

For more information, visit the website of All India ITR

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