How to claim tax benefits on joint home loans?

Joint Home Loans

A joint home loan is a loan which can be obtained by an applicant along with his/her parent, partner or sibling. Since buying a property requires a large amount of money, and if you do not earn enough to qualify for a home loan individually, then you can opt for a joint home loan. One of the primary benefits of a joint house loan is that it maximises the borrowing capacity of the home buyers. It not only allows you to share the debt burden but also extract maximum benefits offered by the Income Tax Act.

As per the Income Tax law, both the loan applicants can claim home loan tax benefit on the principal repayment under Section 80C and on interest amount under Section 24.

What is the eligibility/conditions of claiming the tax benefit?

  • You must be a co-owner: Only co-owners of a property can claim the tax benefit. In a case wherein, you are the borrower of the home loan but not the owner as per the documents, you are not eligible to claim the income tax benefit on home loan.
  • You must be a co-borrower: You should also be an applicant as per the loan documents besides being an owner of the property. If you are the owner and not the borrower, you will not be eligible to claim the income tax benefit on home loan.
  • The property construction must be complete: The tax benefits on a housing property can only be claimed at the start of the financial year in which the property construction gets completed. You cannot claim tax benefits for property which is still under construction.

What are the tax benefits that can be claimed?

  • Each co-owner and borrower can claim Rs. 2 lakh on interest deduction.

If the joint home loan is taken for a self-occupied house, then each of the co-owners and borrowers of the property can claim upto a maximum of Rs. 2 lakh in their tax return. The total interest paid on the loan is allocated to each one in the ratio of their ownership.

Point to remember: The total interest claimed cannot exceed the total interest paid for the loan. For example, Seema and Sanjay bought a house on loan and paid Rs. 4,45,000 in interest, and they have a 50:50 share in the property, then; Seema can claim Rs. 2, 00,000 in her tax returns and Sanjay can claim Rs. 2, 00,000 in his tax returns. Also Read: Benefits of Joint Home Loan

  • Each co-owner can claim Rs. 1.5 lakh on principal repayment.

Each of the co-owner and the co-borrower can claim a deduction of maximum Rs. 1, 50,000 towards repayment of principal amount under Section 80C. This amount is within the total limit of Rs. 1,50,000 of Section 80C.

  • Each co-owner can split the cost of registration and stamp duty and claim 80C deductions.

Payments made under the registration and stamp duty are also eligible for deductions under Section 80C. Hence, owners can split this cost and claim to avail the maximum benefit.

Point to remember: This should be claimed in the year in which they are paid.

Therefore, as a family you will be able to take a larger tax benefit against the interest paid on the home loan; also your interest outgo will be more than Rs. 2 lakh per annum. So, make a smart choice and opt for a joint home loan if you are planning to buy a property soon.

If you want to check how home loan will help you to save tax then use our home loan tax benefit calculator.

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