What are the income tax benefits on second home loan ?

Many middle class investors in India, especially those from the IT sector, are buying houses. Then there are many who are buying their second homes.

Returns from real estate as an investment avenue is only second to equity. And to make it more simpler, you have home loans to assist you in buying your loved property.

Today we will check on what are the income tax benefits on a second home loan in India. Income tax benefits of second home ownership is often confusing and I hope this article will clarify on the basics.

The basics first

Before we go ahead, it might make sense to understand how things operate when you have a single home loan.

First, understand what annual value of house property is and how it is calculated. Note that this figure measures the amount for which your home might be expected to be let out each year. Also note that the annual value of the house which you occupy is nil (zero).

Once you understand this term, you can then figure out how income from house property is calculated.

To recap the formula, it is :

Income from house property = Rental Income net of taxes (Annual Value ) – Standard deduction of 30% – Interest paid on home loan

If the house is let out, you will get rent and as you can see from the above formula, you will have to calculate the rent received and pay tax on it.

For a single home loan that you might have, the principal is allowed as deduction up-to a limit of Rs 1 lakh and interest up-to a limit of Rs 1.5 lakh.

income tax benefits on second home loan

What happens if you have 2 home loans ?

The income tax benefits of second home ownership in India are favoring the investor. Here are the specifics.

One home will need to be considered to be let out while the other needs to be considered to be self occupied. You can pick any of the houses for such a purpose.  It does not matter whether the let out property was fetching rent or not or was lying vacant – the government asks you to pay income tax on it even if you got no rent.

That’s a let down ? Not really – check out the deduction on home loan interest for the second property.

# Full interest on home loan is allowed as deduction for the let out property – so there is no limit of Rs 1.5 lakh as was the case in a self occupied property.

# As far as principal is concerned, for all the properties one has, the total deduction is subject to Rs 1 lakh.


Suppose a person has two houses with the below details. He is paying interest of Rs 80,000 and Rs 125,000 on them during one financial year. The annual value of the houses has been arrived at already and shown below. Home Loan Details

Now the question is, which house should the investor self occupy and which one should he let out to avail of maximum income tax benefits. Note that the principal component of tax savings has not been considered here as even if the home loan principal contribution does not add up to Rs 1 lakh, the other Section 80C deductions more than make up for it. So the interest component of the home loan is only considered here.

House 1 is self occupied

In this case, the NAV of house 1 is zero as it is self occupied so the standard deduction is also not applicable. The income from house property comes to Rs -80,000 and Rs -8,100 for both the houses. So the total interest deduction is Rs – 88,000.

House 2 is let out

House 2 is self occupied

When house 2 is self occupied, the figures change a bit. The income from house property in the self occupied house in this case is Rs – 125,000.

The total interest deduction is Rs -111,200 which is better than when house 1 was self occupied. So to maximize the interest deduction, house 1 should be put on rent and house 2 should be self occupied. House 1 is let out

What are your thoughts on the tax benefits on a second home loan ?


  1. Returning NRI says:

    Thank you for the wonderful article. Here is my situation.
    1- Self occupied apartment. Home loan at 12%. Outstanding principal balance is Rs 8 Lakhs. I am the sole owner of this
    2- Second home which is rented out. No loans on this property. Rental income is Rs 5 Lakhs per annum.
    3- I am planning to purchase an independent house within the same city by taking a second home loan of about 70 Lakhs at 12% interest rate. This will be owned by me and my wife (House wife)
    Here are my questions
    – Can I show my new house (point 3) as self occupied (lets say I purchased it already) while filing taxes, even though I will continue to stay in first house
    – Can the Rental income on house 3 be declared as my Wife’s income, where as I get income tax benefits for home loan
    – Can house 2 be gifted to my wife, so that I do not add rental income to my salary. Technically I can sell it to my wife, but I want to save registration costs which run into lakhs of rupees.
    Your inputs will be appreciated.

  2. Abhishek Chaudhari says:

    What documents needs to be submitted as proofs for second home (let out property) property?

    • TheWealthWisher says:

      I guess they will be home loan documents (if the house is on loan) and rental agreement on the minimum for sure.

  3. I have recently purchased a second house. I am paying 10 months of EMI left for my first house ( co-owned by my wife). can i show the new house a my residing house and start claiming the tax benefit.

    Also if once all the EMI are over (for both house) will i have to show the income from second property at that time also…

    • TheWealthWisher says:

      Your queries are answered in the article and in the comments from readers, please go through it in detail.

      • Can Drawing & Disbursing Officer give benefit of interest & principle on Home Loan while computing the Income Tax of the employee who has more than one house property? If so how to compute? 1. If one house is self occupied & other is vacant.
        2. if one is self occupied & other is on rent.
        3. One Home loan is completely repaid & Home loan of second home return through EMI is in process.
        4. Home loan of both the homes return through EMIs is in process.

  4. i have a home loan going on and will be over in a year. I am planning to buy a new house on loan. Once my old house EMI are over. Can show this new house loan as second home loan and get tax benefit and show the first house ( whoz EMI are over as residing house.)

  5. Subhadeep Saha says:

    I have recently bought a second house. Till now I was getting a tax benfit from my employer directly for the principal and interest part of the 1st home loan (Deduction for my taxable income) . Now, I have informed my employer about the above mentioned benefit and asked them to give the benefit directly ( i.e. deduction of the entire intersest component paid against the 2nd home loan) from my salary. However, employer is stating that they are not aware of this benefit, so I have to claim this when I am filing my tax return. Kindly advice.

    • TheWealthWisher says:

      What is your employer’s name – it is true that if they cannot then you can always file it offline later and claim the benefits.

  6. Hi,
    I need your help for the tax planning.
    I have three houses.
    1. Loan taken -17L, 7 years left.rented for 25k p.m. Annual int. paid -80k
    2.loan taken -62L, under construction, expexted rent 30k p.m. Annual int. paid – 483k
    3.loan taken -43L, under contruction, expected rent 12 p.m. Annual int. paid – 492k
    House no. 2 is the biggest , so planning to shift there.
    Can i show house 1 as self occupied and 2 and three as rented?
    If yes then i will not have rent agreement for house 2?
    What are the documental proofs i need to sybmit to my hr dept.
    Please help. I am throughly confused.

    • TheWealthWisher says:

      Sanjay – you are in undated with property my friend :-)
      A tax consultant will need to do some calculations for you and advise which one to show as occupied.
      You will need rent agreement – it is always wise to have one as the person staying there might need it to claim HRA. The HR dept will need it for sure.

  7. I have two houses , one at my native where my mother stays and the other at my work place where i would stay. at 1st house the rent value is 36000/ and interest paid is 75000/ per annum. I don’t get rent but those are the values. for 2nd one rental value us 1.2 lakhs and interest paid is 3.0 lakhs. now, which one should i show as let out and are there any documents i need to submit to prove that it is let out? as my mother is staying in one,i don’t get rent from any of the flats..

    • TheWealthWisher says:

      To do the calculations, you need to take services of a tax consultant. You will need to show one house as rented out, which one depends on where you get the tax benefits most.

  8. Abhishek Mittal says:

    I have one property in Jamnagar under my name (freehold property) and have recently invested in second under construction property in joint name with my wife. Pocession for the under construction property will be completed after 48 months and have taken loan from HDFC. Can you tell me income tax benefit that i can avail in my return for this new under construction property?

  9. I have two home loan running. i have not rented my second home. what is the value of rent i need to declare.
    do i need to show my employer some documents to get the benefit. and if the employer does not accept this , i can claim it in during filing my return.


    • TheWealthWisher says:

      You need to go to a tax consultant who will guide you on that. If your employer does not entertain you, you can claim it during filing you returns – but what claim are you referring to here ?

  10. i have purchased a second house on loan. what if i don’t want any tax benefit from it, still will i need to show rental income from it.

    Shweta C.

  11. I have first house rented in bangalore and iam in NCR so i am able to avail interest+HRA (NCR)as tax benefit. If i plan to take second house in bangalore, will i be able to avail benefit for second house which interest both the house +HRA (rented house in NCR). In other word is it necessary that out of 2 houses one of them needs to be self occupied?..

  12. My first house in NCR needs a comparitively small loan, while a second one in the city of current residence needs a huge loan. I would be puttng the NCR house on rent, while i will be staying at the new house with the larger loan. Since the higher tax benefit is on the rented apartment, it would have been great if i could show my new residence as a rental and the one in NCR as self-occupied…but this seems wierd and am sure gvt wont allow this reversal of reality. Please can you confirm.

  13. k m chandra shekar says:

    we have booked a flat (second house) jointly in my name and wife’s name by availing housing loan from SBI Rs. 25.00 lakhs. The project is in construction stage. We are servicing only the interest portion w.e.f August 2012. My wife is already having a housing loan for the first house which is self-occupied. Please clarify as to how we should claim IT exemption in our names separately for the 2nd house which is still under construction….

  14. Sudhakar_C says:

    My Employer did not take my second home into consideration. Now i have to claim the Income Tax benefit for second home during filling my IT return. If i need to claim Tax benefit on second home, do i need to produce some documents and calculations to IT dept. Where should i submit them ?

  15. File your returns through a CA/tax consultant and provide him all the documents.

  16. If I have only one house and let out a part of it, will there be upper cap of 150000 towards the deductions under house load interest? I am happy to declare the income from rent.

  17. Can my employer give the benefit of 2nd home loan directly?

  18. PRAKASH says:

    I am working in Dewas. I have one house at dewas M.P which i have already completed the loan and i am purchased another house at Udupi (Karnataka) with 20 lacs loan. Can i get the tax benefit.

  19. j s aulakh says:

    I have one flat where I am residing without any loan in gurgaon. I have bought secound flat in another city likely to be delivered to me in November 13 for which I have taken loan of Rs 14.9 lakhs in 2007 and am paying EMIs since then having principle and interest component each year . so far no claim is shown untill flat is taken over, even after taking over it will take 3-4 months to comleate the woodwork. How do i plan my tax rebate and also the premiums paid ever since. Grateful for suggestions————js aulakh

  20. I have two houses on my name .
    – One house is in Kharghar and I m the sole onwer of that house. My loan on that house is cleared. After loan clearance do i need to show this house in my IT returns.

    – Second house is in Mira Raod which is in joint name with my Husband. For which I m paying EMI and showing the same in IT return as a Self occupied house.

    Can I show the second house as self occupied and not showing the first house in IT returns,

  21. I have two houses .fisrt house is in the name of my wife . i am the joint owner . she is paying interest and principal on this loan .

    second house is in my name with my wife as the jt owner .ther is no loan on this .

    we have rented both the apts .in this case how to compute income tax payable.and who has to pay what?

  22. Can I rent out both my houses which are under loan and stay I on rent? will I get the benefit of HRA + Tax benefit on my 2nd loan

  23. I have taken home loan of Rs. 15 lac. In 2015 it will be completed. Now, after that if I am taking new home loan for say Rs. 15 lac again then what will be the benefits available to me? please note that my first house is not given on rent. It is being used by my family.

  24. Prashant says:

    My friend has two house.One in Mumbai where he stays and One in Pune which he has rented out.The interest paid for Mumbai house is very high almost six times of what is paid for Pune.Is there a way by which he can claim interest of self occupied Mumbai house more then 1,50,000/-

  25. I had taken home loan and after that i had extended the house and taken loan,

    Whether I am eligible for interest on house loan for the extension of house total amounting to Rs. 1,11,000/-

  26. Hi,
    I have taken a second home loan (Advance Disbursed Loan Facility – EMI and i have not opted for pre-emi).The second home is under construction. Can i get income tax benefit by showing this as let out. I have self occupied the first home and getting the income tax benefit of 1,50,000. Please do advise. Thanks

  27. R R mholia says:

    I have taken 2nd loan for construction of 1st and 2nd floor on existing house. I am residing in same without any let o
    ut. please advise me that I will be beneficial for both loan on same plot.

  28. dr r k srivastava says:

    I have one house in Delhi on my name. It is self -occupied.I took loan and repaid it fully. I have a land in Gr NOIDA. I want to construct my house on this land.How can I get maximum IT rebate on 2nd home loan. i am 65 yr old

  29. dr r k srivastava says:

    I have a self occupied property in Delhi and its loan is fully paid up.
    I want to build a house on my land in NOIDA. I am 65 yr old.My annual income is 25 L
    Can I get IT benifit ,if I take home loan. My wife has no property on her name

  30. Tax exemption on paid Registration and Stamp Duty amount for 2nd home ?

    I’m staying on rented flat

    I owned my first flat (presently it’s on rent out) and now I have booked 2nd flat (under construction property and possession is in Dec 2016) and registration is due in Dec 2014

    My Query – Is paid amount against Registration and Stamp Duty of my 2nd flat is tax exempted under 80c? & Can I claim for same in financial year 2014-2015 under 80C?

  31. Shailesh Kumar says:

    I have 2 homes in two different cities, both of which are on loans and both of which are rented out. I also stay on rent. How the tax calculations would be done if I show one of them as self-occupied, even if it is rented out. Would still the Annual value of the rented house (the one shown as self -occupied for income tax purpose) be considered zero and rent is not needed to be shown ? OR both the houses have to be shown as let out and tax calculations are needed to be done as for the let out property for both the houses ?

  32. prakash Soni says:

    I am shifting from Mumbai,I have purchased 2 flats and paying EMIs of around 148000 and 130000 for both the flats.
    Now, I am shifting to Bangalore
    HRA amount I will be getting is around 200000,
    Shall I eligible for getting income tax benefits on both the own flats EMIs as well as on HRA paying at Bangalore.
    I know this is not possible,but what is the best possibilities to save tax in that case.

  33. I’m a central govt employee. I’ve purchased 2nd house.

    I need few clarifications regarding income tax computation.
    1. As I understand, I need to declare 2nd House as LET OUT as first one is self occupied. So, when I declare it as LET OUT, I’ll have to show notional rental value, though it is empty. It is 46 sq.m. and is in Mansarovar, Jaipur.
    I want to know how do I compute this notional rental value.

    2. Wealth tax is also levied for 2nd house. Where should I show it in ITR2?

    May I request your kind response.

  34. i have taken a second top up loan against the same flat as my first loan. i am staying in a different state/city and paying rent. can i combine the interest i pay on both loans for tax calculation.
    secondly – in both loans i have a co-borrower, will the rent i get get divided between the two of us as income?

  35. Dear SirJi,
    My wife is successful in 2014 housing scheme of DDA. She is alloted the flat in Narela G-2. In the application form, I was not the co-owner of the same.
    My Question is can I, being the husband of the successful candidate, become the co-owner of this property now ? Its not about transferring ownership but Its about making me a joint owner of the property.
    If yes, what will be the documents required ?
    I am in the process to ask this from DDA officials also but I just want your valuable informal opinion about it.
    Thanks very much.


  36. I have two properties under my name:
    1) Property in Mumbai (Loan is fully Paid). This is given out on rent.
    2) Property in Bangalore on loan jointly owned between me and my husband.

    I am planning to claim tax benefit against the Bangalore property.
    How do I show the Mumbai property from a tax perspective?

  37. I am having a home loan of 18lacs and I am paying EMI of 22k per month(2,64,000 per year) since November 2014. Now I am planning to take new home loan to buy another property. Please let me know, whether I am eligible for that. If yes then, upto how much I can apply for(considering my monthly salary is 1 Lakh).

    Also I would like tell you that, my first property is in Hyderbad(occupied by my parents) and now I am planning to buy a new property in Bangalore(where I am working and staying in rented house).

    So please let me know if I can go for new home loan for the new property in bangalore.

    Thanks in advance,


  38. If the maintenance fee payable to the society is included in the rent agreement with tenant can it be considered an expense above the standard 30 % deduction? If it is not clubbed with the rent will it be exempt from rental income ?

  39. Dear Sir,
    I am having a home loan from SBI for the purchase of a flat in Bhopal. I reside in Delhi. I am a central government’s employee. Can I avail a second home loan from my office (HRD Ministry) for the same property?

  40. HI,

    I have kind of different scenario.

    I had a home loan and completed the loan by financial year 2014-2015. The loan taken with my Name + my Mother name. The Home place is different from my work location.

    Now, I have given the home to my parents , and planning to buy/build a new home joining with my brother. The new home location is also different from my work location.

    From the above scenario, the new home which I am going to buy will become my self occupied as I have given the old home to my parents.

    Could someone let me know Can I avail the Tax benefit both Principal and Interest?

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