What is the tax liability of buying a second house using a home loan? : 16-09-2019

I bought a flat six years ago with a home loan, for which I am still paying the EMI. I now want to buy an under-construction flat with another home loan. I will get possession of the second flat in December 2021. What will be my tax liability for my second home?

Archit Gupta, CEO, ClearTax says, “Income from house property is taxable once the taxpayer gets possession of the property. From financial year 2019-20, the benefit of considering houses as self-occupied has been extended to two houses. Now, a homeowner can claim two properties as self-occupied and remaining houses as let out for income tax purposes. Therefore, once you get possession of the new flat in 2021-22, you can claim both houses as self-occupied properties and claim the interest paid on loan amount under Section 24. However, the interest claim cannot exceed Rs 2 lakh in aggregate in a financial year for both self-occupied properties. While the second property is under construction, there is no tax incidence related to it. If you are planning to rent out one of the properties, you will have to declare the rental income received during the year while filing your income tax returns of 2021-22. You can deduct the standard deduction of 30% of the income and the interest on the loan and municipal taxes paid during the year. You can claim the entire interest paid on housing loan. If your payments result in a loss from house property, you are allowed to claim up to Rs 2 lakh against other incomes. Any loss above Rs 2 lakh can be carried forward up to the next eight assessment years.”

I give my parents Rs 5,000 per month. Can I claim tax deduction for the amount and if yes, under what section?

Rakesh Bhargava, Director, Taxmann says, “Monthly payments to parents would be considered as gift in the hands of the parents and such payments will not be allowed as deduction from your income. Further, there will be no tax implication in the hands of your parents as gift received from relative is exempt from tax.”

Source : Financial Express