When buying a second home remember that you can get a home loan tax benefit.
Suppose you already live in a property against which you've already taken a loan. The principal amount repaid up to Rs. 1.5 lakh will be deductible under Section 80C. Additionally, interest paid up to Rs. 2 lakh under Section 24 will be deductible.
Now, in case you buy another property with another home loan, you will get deductions on the interest payments. There is no interest cap here. Make sure you negotiate good home loan rates for this purpose.
If you rent out your second home for a particular amount, the amount earned as rent will be considered as the annual value of the property. A standard deduction is allowed for the property which is let out and in case you are repaying home loan interest, you will save on that as well. The annual income of the self-occupied property will be NIL in case you have more than one home. The rent value of the second property will be accounted for taxation. In case you have not rented out the second property, it will be taken as deemed let out property. The notional income/ rent from the home will be assessed and taken as taxable. 20% of the interest to be paid in the pre-construction period will be eligible for deductions if the home is still under construction and is available for 5 years.
In case both your homes have been rented out, the rental income from these homes will be taxed. A total deduction will be available on the interest paid on the home loan which will help you save a hefty amount.