ROLE OF A SECOND PROPERTY

It is a sign that you are prosperous and financially well-off if you own more than one residence. it is advisable for each member of the family to own a separate property for effective real estate planning. In the absence of planning, the second property in your name could cause tax problems. Avoid purchasing a second property in your name. Other family members should also have the opportunity to own their property. You could end up in serious trouble. To avoid this, some families buy property under the HUF name.
You should know that wealth tax is exempt for one house or property. Wealth tax exemption for one property is not related to its value nor size. A wealth tax would apply to the second residential property.

Disadvantages of a second property in your name

A second property that you own is not your primary residence can also be a disadvantage. This is due to the 80C and 24 income tax act 1961. If the house is vacant, you cannot save the interest portion of the loan tax. Income Tax Law clearly states that a home loan for a residential property or flat taken after April 1999 is subject to Section 24 deductions.

These would include interest on loans up to a maximum of 2,00,000. A person cannot deduct the interest component of a loan if he purchases another property or builds a house on vacant land with the help of a housing loan. Section 24 of income tax permits only one residential, self-occupied property to be taken into account.

A second residential property you purchase in your name has another limitation. The second house must generate income, which is known as deemed income. This clause attracts additional taxes even though you don’t earn any income from the second property.

The Income-tax law clearly states your first house has no income. The income tax on deemed rental income would apply to the second and subsequent residential property properties.

Purchasing The second and subsequent houses should be for investment or to let out. Smart real estate planning would allow each family member to own a single residential property that is self-occupied. This will enable them to benefit from wealth tax exemptions and deduct interest on loans for the property.

It is wise to begin searching for a second house after about fifteen years. This will allow you to find a new home after twenty years, the ideal time frame for a house or apartment.