Tax benefits on joint home loan in India

When it comes to a joint home loan the benefits for tax are divided among co-applicants.

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Buying a house is a huge financial responsibility, indeed!

This is why many people prefer to take a joint home loan with their spouses, Siblings (if the property is co-owned) or parents so that they can ease out their burden and repay the loans on time without any hassles.

When you plan to apply for a joint home loan, you should be aware of the advantages, rules and regulations that come along with it. 

Advantages of Joint home loan

  • A co-applicant to your home loan increase your overall loan eligibility.
  • You can go for a bigger home.
  • You can share loan repayment and avail higher tax benefits.
  • Special interest rates for women as co-applicants.

According to the Income Tax law, you can claim several tax benefits when you have taken a joint home loan, and they are explained here.

Who can claim tax benefits?

You need to be a co-owner – If you want to enjoy tax benefits on a joint home loan, you need to be the co-owner of the property. You cannot claim benefits just because you share the repayment burden with the main owner. If you and your husband plan to take a joint loan, you need to agree on being the co-owners of the property first before you become co-borrowers.

You need to be a co-borrower – Most of the times, the property would be registered in the names of the husband and wife, but only the husband’s or wife’s name would be mentioned as the applicant in the loan documents. In cases like these, you cannot claim tax benefits. In addition to being the co-owner, you should also be the co-borrower (an applicant).

Complete property only – You can claim tax benefits for a joint home loan only from the year in which the property is complete. The Income Tax rules do not provide any benefits for properties that are under construction.

Amount of tax benefits you can claim

Principal repayment – The income tax exemptions that are allowed under Section 80C are:

  • The maximum amount of tax deduction that is allowed under this section is Rs.1.5lakhs. According to Section 80C, the co-borrowers can claim a tax deduction to a maximum of Rs.1.5 lakh per year (for the rented & self-occupied property)
  • The deductions that you can claim are based on the payments that you make; the year in which you make the payment doesn’t impact your deductions.
  • Tax benefits on principal repayments are allowed only for properties that are complete.

Interest repayment – The income tax exemptions that are allowed for home loan interest payments under Section 24 are:

  • According to Section 24, the maximum deduction allowed on interest repayments is Rs.2 lakh per year per borrower (for a self-occupied property). For a property that is not self-occupied, there is no cap on tax deductions.
  • When the owner of the property is compelled to stay in a different place other than his own due to his professional commitments, he still gets to claim a maximum tax benefit of Rs.2 lakhs only per year.
  • According to Section 24, these tax deductions for interest repayment are based on the concept of accruals. So, you have to claim them every year, even if you haven’t actually paid anything during that year.
  • If the property has not been constructed/completed/acquired within five years from the year in which you took the home loan, you will get to enjoy a tax benefit of 30000 per year only, instead of Rs.2 lakhs.

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