Do You Own More Than One House?

“The article idea triggered from  one of the few simple queries, how many properties a person can own? On the face of it answer is even simpler, as many as you want. There are no restrictions on the numbers of properties you can own either under the general laws or under the income tax laws.
Thus follows another question  What are the numbers of properties for which you can take a home loan ? There are also no restrictions on the number of properties in respect of which you can take a home,loan,either under income tax act or regulations of RBI. However there are some tax implications under the provisions of Income Tax laws and wealth tax laws for owning more than one houses. I
Here I propose to cover the subject of ownership of more than one property and its implications.
Deduction in respect of Repayment of Principal of home loan:
Presently the income tax laws allow you an overall deduction upto Rs. 1 lac for  repayment of,housing loan,. This amount of Rs. One lac  also covers  amount paid by you on registration and stamp duty for any residential house. As per my understanding of the provisions, there are no restrictions in respect of the number of properties for which this deduction can be claimed. Please note that this deduction is available together with the other items of expense and investments eligible for deduction like,life insurance,premium, School fees for two children, contribution towards PPF, Provident Fund and NSC etc. This is important to know that you can claim this deduction only  if the loan has been taken from banks, housing finance companies and other specified entities. This deduction can only be claimed after you have taken possession of the property.  Even if you have started repaying the principal amount of the loan where the construction is not yet complete, you are not eligible to claim any tax benefits in respect of such repayments.,Repayments of loan taken by you from your friends and relatives are not eligible for this deduction.
Under the proposed DTC, the deduction in respect of repayment of housing loan is withdrawn and will not be available once the DTC comes into force. So for all practical purposes this deduction for principle repayments is available for only one year if the DTC gets implemented as  per schedule.
Deduction for interest payment:

You can claim deduction in respect of interest on,loans,taken for the purpose of purchase or construction of any  property. This deduction is also available in respect of interest on loans taken for the purpose of reconstruction, repairs and renovation of any property. The interest payment can be claimed in respect of any house property and not necessarily residential house property. However if you own one house property and the same is occupied by you, then you can claim a deduction for interest upto  Rs. 1.50 lacs. However in case you have more than one house property, the tax treatment is different. In case you own more than one house property and all   are occupied by you, you have to exercise an option to choose one of the property as self-occupied and the other properties will then be treated is let-out for which  a notional rental income is required to be offered for taxation.
However in case the other property or properties are let out, the actual rent received is taxable in your hands. Also there  is a  difference with regard to tax treatment for interest paid on loan taken for such properties. In respect of the properties  which are either let -out or which has been deemed to have been let-out, you can claim the whole of the interest paid as deduction against the notional rent or actual rent received. Under the proposed DTC, the interest on house property will be allowable only if the other property is let-out thus you will not be able to claim any interest paid in respect of other properties which are not actually let-out. However the deduction upto Rs. 1.50 lacs will continue to be available in respect of one self-occupied house property.
In this case,  unlike for repayment of the housing loan where the loan has to be obtained from specified institutions, there is no such restriction for your eligibility to claim interest payment. Even if you have borrowed money for the above purposes for a house from your friends or relatives, you will be able to claim tax benefits in respect of loan on such loans.
Exemption from Capital Gains:
The present Income tax laws allow you an exemption from long-term capital gains if you make investments in residential house property. The exemption is available in respect of sale of two types of assets. Under first class of long-term capital gains is included long- term capital gains arising on sale of residential house properties. There is no restriction as to the number of residential houses you can own for claiming this exemption. The second class of assets are assets other than residential house properties and it is in respect of capital gains arising on sale of such assets that the income tax laws put a restriction on the number of residential houses you can own.  You are not eligible to claim the exemption in respect of long- term capital  gains on such assets in case you own more than one house in addition to the house which is being purchased for claiming this exemption.
Provision under wealth tax Act:
A few of you would only be aware about the existence of wealth tax as only a few people are covered under the ambit of wealth tax due to exclusion of various financial assets and increase in the minimum slab limit.  However as far as tax on  value of house property is concerned, the wealth tax act provides for exemption of one  house from levy of wealth tax. There is no limit on the value upto which your one house enjoys the wealth tax exemption. The value of the house can be Rs. 1 lac or Rs. 100 Crores. However, the exemption is available in respect of one  house property in case you own more than one, you have an option to choose one of the house as exempt and offer the value of the other house for wealth tax. All the commercial properties are exempt from wealth tax. In case you own more than one house and the others have been let out during the last year for a minimum period of 300 days, it also is exempt from wealth tax.
However in case the value of the second house together with other assets is not more than  Rs. 30 lacs, you still do not have to pay any wealth tax as the total value of  the assets does not exceed the basic exemption limit.
I hope that from the above discussion it becomes clear that each member  of your family can own a house in his independent capacity and thus the tax benefits of owning a single house can be retained by each of the adult members in the family.


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