Ask Mint | Location doesn’t decide tax benefits on second home loan

Ask Mint | Location doesn’t decide tax benefits on second home loan
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First Published: Sun, Apr 05 2009. 10 45 PM IST

Updated: Sun, Apr 05 2009. 10 45 PM IST
T o help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A appears every other Monday.
I have recently purchased a second flat in Pune. I am occupying the first flat and my plan is to rent out the second property. Please let me know if there are tax benefits on the interest paid on a second home loan for a second property bought in the same city. I have heard that one can avail tax benefits on the second home loan only if the property is in a different city.
You can claim tax benefits on the second home loan for a rented property irrespective of the city in which it is located in India. Unlike a self-occupied property, wherein you can only claim tax benefits of upto Rs1 lakh on the principal amount under section 80C of the Income-tax Act, and up to Rs1.5 lakh on the interest paid under section 24 in case of a property that has been let out, you can claim the entire interest amount (net of rental income, repairs) paid.
I just heard from someone about a scheme whereby the customer is required to pay only 20% initially to the developer and the balance only on possession. On checking with the developer, he confirmed such an arrangement with HDFC. It’s surprising to know that such an interesting scheme exists today and not many people seem to know about it. Please clarify.
In recent times, we at HDFC noticed that apart from high property prices, one of the major reasons for resistance towards property buying has been the drop in confidence in buying properties under construction—the customer has a doubt on whether the developer would complete the project within the specified time. To address this issue, we worked closely with select developers to provide products such as 20/80.
As per the special arrangement with the developer, a customer pays only 20% initially, with the balance 80% to be paid on possession of the property. The objective of this exercise is essentially to provide comfort and bring back confidence among home seekers.
Renu Sud Karnad is joint managing director, HDFC. Readers may write in with their queries and comments to askmint@livemint.com
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First Published: Sun, Apr 05 2009. 10 45 PM IST