How to Claim Home Loan Tax Benefits on More Than One Home

The trend of owning multiple residential properties continues to grow as people acquire additional homes for personal use or investment purposes. According to the Income Tax Act, 1961, taxpayers are entitled to claim home loan tax benefits for multiple properties; however, the deductions vary depending on whether the property is self-occupied or rented out.

Though the tax laws have evolved in the past few years, the Old Tax Regime still provides significant deductions for interest and principal repayments.

Classifying Between Self-Occupied and Let-Out Properties

“As per current tax provisions, a taxpayer can treat up to two properties as self-occupied. These are homes used for own residence or by family members, where no rent is earned. Any additional property beyond two is considered “deemed to be let-out” — even if it lies vacant — and notional rental income must be offered to tax under the head ‘Income from House Property’,” says Neeraj Agarwala, Partner, Nangia & Co LLP.

This classification is crucial, as it directly impacts the kind of deductions one can claim on home loan interest and principal repayments.

Tax Deductions On Self-Occupied Properties

For self-occupied property, interest on home loan is deductible under Section 24(b) of the I-T Act up to Rs 2 lakh per annum, provided:

• The home loan was taken for the purchase or construction of a home.

• The construction is completed within five years from the end of the financial year in which the loan was taken.

Principal repayment qualifies for deduction under Section 80C, up to the overall cap of Rs 1.5 lakh per annum (shared with other eligible investments like PPF, life insurance, etc.).

These deductions are available only under the Old Tax Regime. If a taxpayer opts for the New Tax Regime under section 115BAC, they cannot claim these benefits.

Tax Deductions On Let-Out or Deemed to be Let-Out Properties

Let-out or deemed let-out properties enjoy more generous provisions. Entire interest on the home loan is deductible under Section 24(b), with no upper monetary cap.

“However, under the current rules, a maximum of Rs 2 lakh loss under “Income from House Property” can be adjusted against other income heads (like salary or business income) in a financial year. Any excess loss (say, due to high interest payments) can be carried forward for up to 8 assessment years, but can only be adjusted against future income from house property,” informs Agarwala.

Principal repayment on such homes may still be claimed under Section 80C, subject to the Rs 1.5 lakh limit, if conditions are satisfied.

Tax Treatment of Unclaimed Interest at the Time of Sale

Any unclaimed interest on a home loan can be added to the cost of acquisition when computing capital gains on the sale of the property, thereby helping to reduce the taxable gain.

“Taxpayers should be mindful of the limits on interest deductions and aim to claim only the portion that can be fully utilized. The remaining unclaimed interest can be adjusted at the time of sale as part of the cost, provided not already claimed as a deduction under section 24,” says Agarwala.

Taxpayers owning more than one home can still enjoy significant tax benefits, provided they classify their properties correctly and stay within the permissible limits. Strategic use of these provisions can result in substantial tax savings over the years.