If you are planning to own a home along with your spouse/partner, you can easily avail several tax benefits on your home loan. This home loan could be a joint home loan, which you and your partner can avail together.
However, to enjoy these tax benefits, you must fulfill the following requirements-
The borrower must be a co-owner on the property
Many times, a borrower avails a joint home loan with his/her spouse/partner, but he/she is not named as the owner of the property. Sometimes, the property is named in the sole ownership of the spouse/partner. In such cases, only the property owner can claim tax benefits on the home loan. Hence, it is important that in order to enjoy the tax benefits on the joint home loan, the borrower must be a co-owner of the property against which the loan has been availed.
The borrower must have a co-borrower for the joint home loan
Besides being the co-owner of the property, you must also be the co-borrower of the joint home loan to enjoy the tax benefits on it. If as a co-owner of the property, you are not contributing to the home loan EMI, you cannot claim any tax benefit.
The construction of the property must be complete
You can only start enjoying the tax benefits on your joint home loan from the financial year in which the construction of the property is complete. If the property is still under construction, you cannot claim any tax benefits on your home loan.
If you fulfill all the above-mentioned criteria, you can enjoy the below-mentioned tax benefits on your joint home ownership-
I. Tax Benefits on Principal and Interest Repayment
For Self-occupying houses:
In case a borrower has taken a joint-home loan on a house that he/she is self-occupying, he/she can avail the following tax benefits-
A cumulative tax benefit of up to INR.2 lakh annually, per co-borrower.
The borrower can also claim tax deductions on the interest paid during the construction phase of the property. However, this deduction can only be claimed in the financial year in which the construction of the property is complete.
Things to keep in mind
The borrower has to get the relevant home loan tax benefit certificates from the banks/NBFCs to claim the benefits.
A limit of INR.2 lakh per annum is applicable to the interest paid during the pre-construction phase.
However, the principal repayment done during the construction period cannot be claimed for tax deductions.
The joint home loan tax benefits can be claimed only if the construction of the property is completed within 5 years of availing the joint home loan.
If the construction takes more than 5 years for completion, the tax deduction limit reduces to INR.30,000 from INR. 2 lakhs.
For let-out houses
Even if the property against which a joint home loan has been taken is let out, the borrower can still enjoy tax-benefits on it. For such properties, each of the co-borrower is taxed based on his/her respective share of rental income. For making these claims, the owners need to submit their annual housing loan certificate while filing the returns. Each of the co-owner can claim for tax deductions up to INR.1.5 lakhs per annum on expenses such as principal home loan repayment amount, registration fees and stamp duty charges.
To sum it up,
Limit per annum
Interest paid for housing loan
Up to INR 2,000,00
Other charges (Repayment of the principal amount, registration fees, stamp duties, etc.)
Up to INR 1,50,000
Section 80 C
Interest paid during pre-construction of property (upto 5 installments)
Up to INR. 2,000,00
II. Tax Benefits on investment in specified bonds
Joint home loan borrowers can avail tax benefits when they sell a property and direct the received funds as investments into specified bonds, under Section 54EC of the Income Tax Act. These specified bonds are issued under the NHAI (National Highway Authority of India) and the Rural Electrification Corporation (REC). Under this Section, each co-owner can enjoy tax-exemptions up to INR.50 lakhs on the capital gains obtained from the sale of this property. Thus, together a total of INR 1 crore could be saved from the sale of such property. However, both the owners must own the property for a minimum of 2 years.
III. Tax Exemption on Reinvestment of Property
Joint owners who sell an old property and reinvest the amount to buy a new one are also eligible for tax exemptions under Section 54 of the Indian Tax Law. Either these exemptions could be on the capital gains or on the purchase cost of the new property (whichever is lower). Moreover, each co-owner can calculate their respective capital gains and invest accordingly in the new property to reduce the tax payable. However, to be eligible for these tax gains, both the owners must have held the property in their name for a minimum of two years.
Thus, to sum it up, a borrower can avail several tax benefits on his/her joint home loan. However, it is important that the borrower co-owns this property and avail the loan as a co-owner. Depending on the income bracket that the borrower falls into, the tax exemptions may vary for each co-owner. Apart from these tax-benefits, having a co-applicant on your house loan offers several other benefits such as an increased home loan eligibility, reduced burden of loan repayment, and capacity to avail a higher home loan amount.
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