I have two home loans. As I understand, the Union Budget has has restricted set-off of loss towards second home to Rs 2 lakh in a financial year. Will it impact my current investment in the second home? It is an under-construction project in Pune’s Vimaan Nagar. Is it advisable to sell the second home?
As per the Budget provisions, interest on self-occupied property will be allowed to be deducted to the extent of Rs 2 lakh. In this case, the second home is currently under construction; hence no deduction of interest will be currently available. The interest paid during this construction period will be allowed to be deducted in five equal installments from the year of possession along with the interest paid during that year.
Thus, the combined interest (from self-occupied property and second let-out property) will be considered while calculating the income from house property. The loss (if any) will be restricted to Rs 2 lakh to be set off against other heads of income in that year and the balance can be carried forward for eight assessment years, to be set of against income from house property. Thus, the tax incentives earlier available on investing in a second home are no longer available.
However, any decision to sell the second property should be based on factors such intended use of the property, expected returns from capital value appreciation, change in market dynamics resulting in loss of appeal for the location property, availability of alternative investment avenues and associated tax-adjusted returns, etc. The value of the loss due to unavailability of this tax benefit has to be reasonably high for you to consider selling the unit at this stage.
The Union Budget has announced benefits for developers of affordable housing. Are there any benefits for users purchasing affordable homes in this budget?
There are no new tax benefits for users purchasing affordable homes. However, the PM had announced on December 31, 2016, that certain benefits such as 4% rebate in interest for loans of up to Rs 9 lakh and 3% for those up to Rs 12 lakh would be available. Further, since the government has announced that housing units would qualify for “affordable housing“ tag based on the carpet area, more units will fall within the purview. This would provide buyers with wider choices and help them get the benefits of lower prices and interest.
Credits ET Realty