When you want to turn your dream of becoming a homeowner into reality but do not have the necessary funds to do so, you can always go for a home loan.
But, if you think that your own personal eligibility is not sufficient, you can always get a co-applicant on board and own a home in a joint partnership with them. For doing so, the Indian government rewards you through various tax benefits you can claim.
Read on to learn all about joint home loan tax benefits.
A few conditions you must meet to claim tax benefits on a home loan for joint owners include the following:
The home must be fully constructed
You must be a co-owner of the home
You need to be a co-borrower of your home loan
Make sure you meet the aforementioned criteria for availing home loan tax benefits for joint applicants. While opting for a home loan in joint name, tax benefits you can enjoy are many. To that end, here are a few tax benefits for joint home loans.
Here are the two most important tax benefits available according to the Income Tax Act of 1961:
Under this section, you and the co-owner are eligible to claim tax deductions of up to ₹2 Lakhs during every financial year. Note that you can claim this on the interest component of your home loan until your tenure ends.
However, you and your co-owner must occupy the house if you want to enjoy this type of tax deduction.
Under this section, you and the co-owner can claim a tax deduction of ₹1.5 Lakhs each and every year on the principal component of the housing loan until the loan maturity.
Now that you are familiar with the types of joint housing loan tax benefits, here is a hypothetical example to help you understand the scenario.
You may be aware that as a co-owner and co-borrower of the loan, you can claim a tax deduction of up to ₹2 Lakhs per year for the interest paid on the home loan while filing your income tax returns.
The total tax deduction for interest paid will be allocated between you and the co-owner based on the ratio of ownership under Section 24 of the Income Tax Act of 1961.
For instance, assume you and your father have purchased a home on loan, and you have paid a total of ₹4.5 Lakhs as interest. Moreover, you both have a 50:50 share of the property. In this case, you and your father can both claim home loan joint account tax benefits of ₹2 Lakhs each.
However, in the case of a rented property, you can only claim a tax deduction of up to ₹2 Lakhs under this section. Additionally, you and your father are also eligible to claim a deduction of ₹1.5 Lakhs each towards repayment of the principal amount under Section 80C of the Income Tax Act.
The bottom line is that as a family, you will be able to claim a larger tax deduction on the interest and principal paid on the home loan taken for a jointly owned property.
For all joint house loans, you can split the tax benefits among all co-borrowers. As is evident from the example above, the tax advantages are split between co-borrowers of a home loan.
According to Section 80EE tax benefits for joint home loans, you can claim a deduction of up to ₹50,000 on the total interest you pay towards your home loan repayment. Note that this deduction is over and above the ₹2 Lakh deduction applicable under Section 24(b).
The catch here is that you can avail Section 80EE benefits only if you buy a house for the first time, and the total loan amount you avail must not exceed ₹35 Lakhs. Remember that your property needs to be worth ₹50 Lakhs in order to avail tax rebates on joint home loans.
Similarly, both co-borrowers are eligible for a deduction of ₹50,000 if both are first-time buyers. As per Section 80C joint home loan tax benefits, you can claim deductions up to ₹1.5 Lakhs from your taxable income.
As joint borrowers, you and the co-borrower can both claim ₹1.5 Lakhs deduction, helping you double your tax benefits. Remember that you can enjoy these benefits only on completely developed properties.
According to Section 24(b) home loan tax benefits for joint applicants, you can claim deductions of up to ₹2 Lakhs. Similar to other tax benefits, you and the co-borrower can claim individual deductions.
However, this is valid only on the interest component of your home loan and not on the principal amount. To avail this tax rebate on a joint home loan, your house construction needs to be complete within a timeline of 5 years from the date you avail the loan.
To avail tax benefits, both individuals need to be co-owners of the property. These co-borrowers can claim a tax rebate on their proportion of shares. This simply means you must take into consideration your and your spouse’s repayment capacity when planning the share of a home loan.
In simple words, even if co-borrowers are equal but their loan share is 60:40, note that tax benefits will also be shared in a similar manner. If this ratio is changed to 70:30, even tax benefits will change accordingly.
Simply put, if you are included in a higher tax bracket, you must opt for a higher loan ratio to save tax. Ideally, it is advisable to not change the loan share and keep it constant throughout the loan tenure.
Some essential pointers you must keep in mind include the following:
When it comes to joint home loans, the tax benefits claimed by you and the co-owner are divided
The division of tax exemption will be based on the ownership ratio of the loan
You need to avail the home loan in the name of two owners
The ownership ratio must be expressed in percentages and clearly mentioned in papers
The bottom line is if you buy a home jointly with a family member of yours or your partner, you can avail joint home loan tax benefits. If you want to learn more about housing loans and various other tax benefits, you can do so on Bajaj Markets.
There are forms of credit available on Bajaj Markets, such as personal loans, home loan balance transfer, and other options.
You can avail a maximum tax benefit of up to ₹2 Lakhs on the interest component of a joint home loan.
As per Section 24(b), you can claim maximum tax benefits of up to ₹2 Lakhs on the interest component of your loan. You can claim ₹1.5 Lakhs on the principal component of the home loan.
The maximum tax benefit you can avail on the interest component is ₹2 Lakhs for each co-borrower.
Both need to be property co-owners and co-borrowers of the loan. Apart from these two criteria, the construction of the property must be complete for you to enjoy joint home loan tax benefits.
The tax deductions applicable on a joint home loan include Section 24(b), Section 80EE and Section 80C.