What financial approach will lead to the most happiness in long run? One of the studies says that “buying a apartment and focusing on things that will be used daily” gives financial happiness. Purchasing a second home is a happy thing a person can do? This is yes for few and definite no for few more. Purchasing a first home is definite happiness, it gives a secure feeling. For a large set of people in India, owning a second home is luxury or it has been purchased to save on the taxes. Lots of homework should be done before proceeding to purchase the second home. Tax benefits may not be as big as their first home purchase. Simple tips and facts as below shall assist in getting maximum benefits out of this purchasing the second home.
For the first house, the loan taken and paid up to 1 Lac rupee shall meet the criteria of tax saving. For the second house, only the interest paid up to 1L is eligible for deduction. Principal amount paid in second home loan does not fall under tax saving criteria
If the second home is getting constructed then 20% of pre-construction amount’s interest will be considered for a tax deduction.
A second home purchase is not always beneficial at tax perspective. If a person has two houses then only, one house can be claimed as self-occupied and other is regarded as property let for rent. Tax officers deem that the income from the rental amount as a taxable one. Also for the second house, a wealth tax of 1% will be levied annually if the property value is more than 30 Lac Rupees.\
In the case, if the second house is also self-occupied, being used by parents, or if it can be proved that the home was vacant for a certain period then tax benefits can be availed.
If either of the husband or wife already owns a property and others don’t then it is a brainy thing to register the second house in another partner name. In an event that if the second house is jointly registered in the name of the husband and wife then the rental income gets divided according to the percentage of shares in the property.
Buying a house is an unassailable investment but does not just do this for the sake of saving tax. Feel comfortable with the finances, get the suggestion of experts and purchase second address.