What are the Tax Implications of Owning More Than One Home?

It is important to understand the tax consequences and benefits when you own more than one home

Income Tax Deductions for Repayment of Principal

• Section 80C allows you an overall deduction upto Rs 1.5 lakh for repayment of the housing loan. You can claim this for as many homes as you own
• You cannot claim the above benefit under Section 80C if the construction of the home is not completed.
• Repayments of a loan taken from friends and relatives are not eligible.

Income Tax Deductions for Repayment of Interest

• In addition to the principal you can claim deduction for the interest paid on your home loan
• You can claim income tax deduction for interest for any house property including commercial properties
• If you own only one home and it is occupied by you then the maximum interest you can claim is Rs 2 lakh
• If you own more than one home and one of them is rented out then for the rental property you can claim the full interest paid against the rent received.
• The above deduction for rental property is available even for loans taken from friends and relatives

About Capital Gains Exemption

• Under Sec 54 long term capital gains on sale of residential home are exempted if such gains are invested for purchase or construction of another residential home. There is no restriction on the number of homes you own to claim benefit under this section
• Under Sec 54F long term capital gains arising on sale of any asset other than residential home are not exempt if you own more than one home.
• So let us say you already own a home and you are selling a piece of land and plan to invest the proceeds to buy yourself another home, keep in mind the capital gains arising on sale of land are not exempt since you already own another home.

About Wealth Tax Exemptions

• Wealth tax act is applicable only if the total value of your house along with your other assets is more than Rs 30 lakh.
• Wealth tax act provides for exemption of one house from levying wealth tax
• All commercial properties are exempt from Wealth tax
• If you own more than one house and all your other houses have been rented for more than 300 days during the year then these houses are exempted from Wealth tax.