2nd Home in ITR: 3 Tax Rules You Must Know

If you own more than one house, the Income Tax rules treat your second property differently. Getting this wrong in your ITR can trigger a tax notice or cost you extra money you didn't need to pay.

Here's what happened: Under Indian income tax law, only one property can be declared self-occupied — all others are treated as 'deemed let out' even if vacant.. A deemed let-out property requires you to show notional rental income based on fair market rent, which gets added to your taxable income.. Many second-home owners wrongly report both properties as self-occupied in their ITR, a common error that income tax notices are increasingly targeting..

What you should do: Decide which property to declare self-occupied — pick the one with higher notional rent to minimise your taxable deemed income.. Calculate fair market rent for your second property using comparable rents in your locality and report it accurately under 'Income from House Property'.. Claim the 30% standard deduction on net annual value and deduct home loan interest (no upper cap for let-out property) to legally reduce your tax outgo..

For a let-out or deemed let-out property, there is no ₹2 lakh cap on home loan interest deduction — unlike a self-occupied property. This can significantly cut your taxable income if your EMI is large.