COURTKUTCHEHRY SPECIAL ON TAX BENEFITS ON HOMELOANS
Tax Benefits on Multiple Home Loans: Self-Occupied vs Let-Out Properties Explained
Self-Occupied Homes – Limited Deduction, Old Regime Advantage
Let-Out Homes – Wider Scope but Taxable Rental Income
By Our Business Reporter
New Delhi: January 16, 2026:
Owning more than one house is increasingly common in India, especially among urban professionals and investors. But when it comes to tax benefits on multiple home loans, the rules are not the same for all properties. The Income Tax Act distinguishes between self-occupied homes (where the owner lives) and let-out homes (rented to tenants).
Also Read: Madhya Pradesh High Court Slams Trial Court for Ignoring Deadline in Civil Case
The difference matters because it directly impacts how much deduction you can claim on home loan interest and principal repayment. With rising real estate investments and multiple loans, understanding these rules is crucial for taxpayers to maximize benefits and avoid surprises during tax filing.
Self-Occupied Homes – Limited Deduction, Old Regime Advantage
For self-occupied properties, the tax law is restrictive:
- Interest Deduction: Under Section 24(b), the maximum deduction allowed is ₹2 lakh per year for interest paid on home loans. This applies even if you own multiple self-occupied houses.
- Principal Repayment: Under Section 80C, you can claim up to ₹1.5 lakh per year for principal repayment, but only under the old tax regime. The new regime does not allow this deduction.
- Number of Properties: Taxpayers can declare up to two houses as self-occupied. Any additional houses are automatically treated as let-out, even if they are vacant.
This means that if you own two homes and live in one while keeping the other vacant, both can be declared self-occupied. But the interest deduction cap of ₹2 lakh remains unchanged, regardless of how many loans you have.
Let-Out Homes – Wider Scope but Taxable Rental Income
Let-out properties offer broader tax benefits but come with conditions:
Also Read: Supreme Court Bars RWAs and Homebuyers’ Societies from Intervening in Builder Insolvency Cases
- Interest Deduction: For let-out homes, there is no upper limit on interest deduction. You can claim the entire interest paid on the loan.
- Set-Off Restriction: However, the maximum loss from house property that can be set off against other income is ₹2 lakh per year. Any excess loss can be carried forward for up to 8 years.
- Rental Income: The rent received is taxable under “Income from House Property.” Standard deduction of 30% of net annual value is allowed.
- Multiple Loans: If you have loans for multiple let-out properties, you can claim interest deduction for each, but rental income must be declared for all.
This makes let-out homes attractive for investors, but the tax liability on rental income must be factored in.
Wider Context – Old vs New Tax Regime
The choice of tax regime also affects benefits:
- Old Regime: Allows deductions under Section 80C (principal repayment) and Section 24(b) (interest). Best suited for taxpayers with high loan repayments.
- New Regime: Offers lower tax rates but removes most deductions, including home loan principal repayment. Only limited benefits apply.
Experts suggest that taxpayers with large home loan interest payments may benefit more under the old regime, while those with smaller loans and fewer deductions may prefer the new regime.
Practical Example
Suppose a taxpayer owns two houses:
- House A (Self-Occupied): Loan interest ₹3 lakh, principal ₹1.2 lakh. Deduction allowed = ₹2 lakh (interest) + ₹1.2 lakh (principal under old regime).
- House B (Let-Out): Loan interest ₹4 lakh, rent ₹3 lakh. Deduction allowed = full ₹4 lakh interest, but loss set-off capped at ₹2 lakh. Remaining ₹2 lakh carried forward.
Also Read: Justice G.R. Swaminathan: The Madras High Court Judge Whose Orders Sparked a National Debate
This example shows how self-occupied homes face deduction limits, while let-out homes allow larger claims but with rental tax obligations.
Implications for Taxpayers
- Plan strategically: Decide which houses to declare as self-occupied to maximize benefits.
- Choose regime wisely: Old regime is better for those with high loan repayments.
- Track rental income: Ensure compliance by declaring rent and claiming deductions correctly.
- Multiple loans: Benefits can be claimed for all loans, but limits apply depending on property type.
Conclusion
Also Read: Supreme Court: Disability Rights Must Be Core Part of CSR for True Workplace Equality
The tax treatment of home loans in India is nuanced. Self-occupied homes offer limited deductions, while let-out homes provide broader benefits but add rental tax liability. With multiple loans, taxpayers must carefully plan declarations and regime choices to optimize savings.
As real estate investments grow, understanding these rules is essential for financial planning. The government’s approach balances relief for genuine homeowners with checks against excessive tax sheltering.
Suggested Keywords for SEO (Google + ChatGPT)
- Tax benefits self-occupied vs let-out homes India
- Multiple home loans tax deduction rules
- Section 24(b) interest deduction home loan
- Section 80C principal repayment home loan
- Old vs new tax regime home loan benefits
- Rental income tax rules India 2026
- House property tax benefits multiple loans
- Self-occupied property tax deduction limit
- Let-out property tax benefits India
- Home loan tax planning India
Also Read: Supreme Court: Motive Becomes Irrelevant When Dying Declaration Provides Direct Evidence