For any individual, buying a home tops the list when it comes to financial priorities. However, the list does not stop there, for once you have purchased your first house, you set your target towards buying the next. This can be due to a plethora of reasons, but the biggest of which happens to be investment.
Additional Read: RBI home loan guidelines
Over the years, people have gradually started realizing that the money which is invested in real estate not only increases and also the second house could be used for generating an additional source of revenue.
Moreover, if you have already taken a home loan, there are several deductions which can be claimed on it as has been explained below -
Benefits on First Home Loan
If you have an already existing home loan and if you are living in the house you are living in, then it is termed as "self-occupied" and eligible for deductions on both the interest and the principal. This is because on the principal part, you can claim up to Rs. 1.5 lakhs under Section 80C and Rs. 2 lakh on the interest part under Section 24(b) of the Income Tax Act.
Benefits on Second Home Loan
When a purchase of a second house is made using a home loan, then it is termed as a "let-out" property and accordingly the tax treatment changes in this case. In this case only the interest part of the home loan tax benefits is eligible under Section 24(b) subject to a maximum of Rs. 2 lakhs.
Despite this, opting for a home loan is better for purchasing your second house because if you don’t you just have to rely on the rent and you will have used a considerable chunk of your savings. On the other hand, if you use a home loan, you get a rebate on the interest, you get the rent and above all, your savings are intact.