You can avail tax benefit on home loan for second property

With respect to interest on the loan, the quantum of deduction would depend upon whether the second residential property against which the home loan would be availed would be considered as a self occupied property (SOP) or let out property (LOP) or deemed to be let out (DLOP)


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I have been working in a multinational firm for over 5 years. This is my first job. Can I withdraw the full amount from my provident fund (PF) account next month? What is the process?

—Aditya Singh

The withdrawal of PF will be as per provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires you to have a non-employment period of two months after leaving your job. But while in employment, as per the provisions applicable to the PF maintained with the Regional Provident Fund Commissioner, one can withdraw partially from the accumulated PF for specified reasons such as purchase of house, marriage, higher education of children, illness, among others, subject to prescribed conditions.

You would be required to make an application to the Regional PF Commissioner through your employer along with Form 31 for withdrawal of PF amount. The above provisions are as per the Employees Provident Fund (EPF) scheme. If it is a private PF Trust maintained by your employer, the provisions could be different. Check the rules with respect to the PF withdrawal with your employer. Withdrawal from a recognised PF will trigger tax liability if an employee does not render continuous service for a period of five years or more to the employer. Do report the PF withdrawal in the income tax return form to be compliant from a reporting perspective.

I took a home loan in 2010. The same has been repaid. I want to take another home loan. Will I get tax exemptions?

—Raman Malhotra

We have assumed that the new housing loan would be availed for buying or constructing another residential property. Yes, you can avail the tax benefits in respect of the home loan availed for the second residential property.

With respect to interest on the loan, the quantum of deduction would depend upon whether the second residential property against which the home loan would be availed would be considered as a self occupied property (SOP) or let out property (LOP) or deemed to be let out (DLOP). For SOP, you can claim deduction towards interest subject to the cap of Rs.2 lakh per financial year (FY). For LOP or DLOP, the entire interest paid can be claimed as deduction against the net rental value or deemed rental value offered to tax.

If you own more than one property and both the properties are vacant (i.e., not rented), then any one property at the discretion of the individual is treated as SOP and the other property is considered as DLOP. For DLOP, a notional rental income is required to be offered to tax. This is determined based on the rent a similar property may earn.

You can also claim deduction towards repayment of principal portion of the loan subject to overall cap of Rs.1.5 lakh under section 80C of the Income tax Act, 1961, irrespective of whether the property is SOP, LOP or DLOP.

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