Home Loan

There is no restriction on the number of properties you can own. Similarly, there is no restriction on the number of houses for which you can take home loans and claim tax benefits, either under the tax laws or banking laws. However, the amount of home loan available to you for all the properties taken together, shall depend on various factors like your earnings, age and your ability to service the loan. You can avail of certain tax benefits for interest paid and/or for repayment of the principal amount, with respect to money borrowed for buying, constructing, renovating or repairing a house property.

You can claim deduction for interest payable on a loan, taken for purchase, construction, repair, or renovation of any property, whether commercial or residential, under Section 24(b). This deduction on interest payment is available, for any residential or commercial property owned by you. It is also available whether the money is borrowed from a bank/housing company, or from your friends and relatives. This deduction is available from the year in which the construction is completed and possession taken, in case of under-construction property. Any interest paid during the construction period can be amortised and can be claimed in five equal instalments, beginning from the year in which the construction is completed and possession of the house is taken.

In case you own only one residential house, which is occupied by you, the maximum deduction on interest repayment is restricted to Rs two lakhs per annum. In case of money borrowed for construction of a house that is intended for self-occupation and construction of which is not completed within a period of five years from the end of the financial year in which the money is borrowed, this deduction gets restricted to Rs 30,000 only. So, it is very important to get the construction completed within the stipulated time limit.

Tax benefit on repayment of principal

As per the provisions of Section 80C, you can claim up to Rs 1.5 lakhs for repayment of the principal component of a housing loan taken from specified institutions for a residential house property, together with other eligible items like provident fund contribution, life insurance premium, tuition fees, PPF contribution, NSC, ELSS, etc. This deduction is also available for any amount paid for registration and stamp duty of a residential house. The income tax laws do not have any restriction on the number of houses for which you can claim this deduction. The income tax laws also do not distinguish between self-occupied property or a let out property, for this purpose. So, although, you can take home loans for more than one property, the aggregate amount of deduction shall be restricted to Rs 1.5 lakhs, for repayment of the principal amount of all the home loans taken together.
This deduction too can be claimed only after you have taken possession of the property. If you have started repaying the principal of a home loan before taking possession, this benefit is not available to you. Please note that repayments of loan taken from your friends and relatives, are not eligible for this deduction. In case you sell or transfer the residential house within five years from the end of the year in which the home loan was taken, no deduction is available in the year of transfer and the deductions claimed in the earlier years are reversed and taxed in the year of such transfer.