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TOPIC: Tax Benefits of purchase of Second house

Tax Benefits of purchase of Second house 2 years 1 month ago #4405

Dear Krishna, I live in Mumbai and own a flat in Bangalore for which there is a small portion of loan outstanding. The Bangalore flat is not on rent. I am now buying a bigger under construction flat in Mumbai with a loan of 3Cr. My questions:
a) Do I need to continue with the first housing loan which is in its last leg or should I pay it off? Is it required to run both the loans to get the tax benefit on 2nd loan?
b) Both my wife and I are earning members of the family but it will only be I paying for the EMI. Is it still beneficial to have joint loan? Can she avail Tax benefit if she is joint applicant and joint owner of the house but not paying towards EMI?
c) Should I go for a longer (20 yrs) or shorter (10 yrs) tenure for the loan for availing the max. tax advantage point?
d) how will be the tax treatment of amount paid towards Pre EMI ? Will all Pre EMI interest be claimable as loss in 5 equal installments and be deductible from salary earning along with the interest payable in the 1st year of possession?
e) Will all interest portion of EMI payable on possession be deductible from salary income as loss from house property?
Please help me with response to these questions. Thanks,
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Tax Benefits of purchase of Second house 2 years 1 month ago #4406

Hi Amitabh,

1) No you don't need two home loans running at the same time to take advantage of second home loan interest rate exemption. You can pay off the first home loan if you think that it offers insignificant principal tax exemption. Otherwise, it might be a good idea to retain it. 2) If you both are joint owners of flat and loan, then you can take benefit of tax exemption. However, you would also need to show the split up of emi paid by both applicants for both of you to get exemption.
3) as of now, interest rates are very high. It might be better to take a short term home loan. However, it would also depend on your repayment abilitites, your personal family preferences that might come up in the next few years.
4) by pre-EMI do you mean the emi paid during the construction period.
5) no emi part will be deducted from section 24 without any upper limit and not as loss from property.

Thanks and regards,
Krish
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