Many aspiring home buyers in India prefer applying for a joint home loan to enhance their eligibility and get a higher amount. Apart from being a feasible way to get the desired funds for home purchase, applying for a joint loan is a great way to get added tax benefits. There is no doubt that a home loan is an excellent tax-saving instrument, but do you know that when you apply for a joint home loan, both the co-applicants can avail of tax benefits individually. However, for the partners to get the tax benefits guaranteed under different sections of the Indian Income Tax Act, you must meet specific requirements.
One of the most critical prerequisites to get tax benefit on a joint home loan is that you must be a co-owner of the property. This means the property you have purchased must be registered in your name as the co-owner. There have been many situations where the property is owned by a parent, and they apply for a joint loan with their child who takes the responsibility of repayment. In such a situation, if the child is not a co-owner, they are not eligible to claim tax benefits.
Conditions that you must meet to get tax benefits on a joint home loan.
- As mentioned earlier, one of the important criteria for claiming tax benefit on a joint house loan is that you must be a co-owner of the property.
- Apart from being a co-owner of the property, you must also be a co-applicant of the loan as per the loan documents. Property owners who are not borrowers and don’t contribute to the loan repayment cannot avail tax benefits on the joint home loan.
- If you have availed of a joint home loan for buying an under-construction property, you can claim the tax benefits only from the financial year in which the property construction is completed. You cannot claim tax benefits on an under-construction property.
What tax benefits are available on a joint home loan?
If the property you purchase is self-occupied, then each co-owner who is also a co-borrower of the loan can claim a deduction up to Rs. 2 lakhs in a financial year on the repayment of the home loan interest. This deduction is guaranteed under Section 24 of the Indian Income Tax Act.
An important thing to note here is that the total interest repaid on the loan is allocated to each co-owner in the ratio of the ownership. This means the total deduction you claim on the interest repayment cannot be more than the total interest you have repaid.
Let us understand this without an example. If you and your spouse have availed of a home loan and have repaid Rs. 4, 50,00 in interest in a financial year and you share the property ownership in 50:50 ownership, then you both can claim Rs. 2,00,000 while filing your tax returns.
Additionally, each co-owner can claim a tax benefit of Rs. 1.5 lakhs in a financial year on the repayment of the principal amount under Section 80C of the IT Act.
Thus, applying for a joint home loan allows you to get greater tax benefits as a family. Make sure that you are aware of the tax provisions and benefits available to you and make the most out of it.