If you have taken a joint home loan with a co-borrower, there are certain tax benefits that can be enjoyed by the joint owners, if some requisite conditions are met. Do note that ‘ownership’ in the property is a pre-requisite for doing so. Even if you have taken the loan jointly but are not an owner in the property, you are not eligible for the tax benefits. For instance, if a property is owned by a parent and the parent and a child take a home loan which is paid off by the child, the child will not get any tax benefits since they’re not a co-owner. Following are the conditions for claiming tax benefits on the property –
- You must be co-owner in the property. Otherwise, you cannot claim any tax benefits
- You must be a co-borrower of the home loan. If you’re an owners but not a borrower, you shall not get any tax benefits
- The property’s construction should be complete because tax benefits can be claimed starting the financial year in which its construction was complete
When the above conditions are met, the following tax benefits are available to be claimed –
- Self-occupied property – Each co-owner, who is also a co-borrower of the home loan, can claim a maximum deduction Rs. 2 lakhs for the loan’s interest payment on their Income Tax Return. The total interest paid will be allocated in the ratio of the borrowers’ ownership. The total interest claimed by the joint applicants cannot exceed the total interest paid for the home loan. Say, a parent and child buy a house on loan in equal ownership and pay Rs. 5 lakhs in interest. Both can claim Rs. 2 lakhs each on their tax return.
- Rented property – The interest available for claiming as deduction is restricted to the amount to which loss from the property doesn’t exceed Rs. 2 lakhs.
- Each co-owner can claim deduction of maximum Rs. 1.5 lakhs towards the principal repayment under section 80C, under the overall limit of Rs. 1.5 lakhs under the section.
As a family, you will get a higher tax benefit against the interest paid on the loan when you’re owning the property jointly owned and your interest payment is greater than Rs. 2 lakhs per annum. Sometimes, it happens that you pay the loan instalments and the co-borrower doesn’t contribute. In such a case, you can claim the entire interest amount as a deduction in your IT Return. In fact, the stamp duty and registration charges for the property can also be claimed by the joint owners.
When you apply for a home loan jointly, check the home loan eligibility for all applicants. Compare home loan interest rates across different lenders, banks and NBFCs. You can also use a home loan calculator or a home loan EMI calculator to calculate your EMIs and see if you can afford to repay the joint home loan. Hope this has helped you understand the tax benefits and deductions when you apply for a home loan jointly.