The interim finance minister abolished income tax on notional rent from the second self-occupied house, benefiting those with two houses but no outstanding loan on the second one. “Since most people don’t have housing loans running on their self-occupied second house, this will benefit them. The main advantage of this move is operational – it does away with disputes regarding the computation of notional rent,” said Suresh Surana, founder, RSM India.
However, it will complicate matters for those with outstanding loans on their second house. “This is because the general taxation rule is that once an income source becomes tax-free, deduction available on expenses related to that also goes,” said Surana. People who are using housing loan interest on their second house for tax planning will take a hit because the maximum interest benefit allowed on both these houses will now be restricted to Rs 2 lakh.