Buying a home is a dream for many. Purchasing a home is not only expensive but also a one-time investment. To achieve that dream, banks and NBFCs have come up with home loan plans. However, you need to have a strong financial profile to apply for one. Individuals, who cannot present a strong financial profile alone, can opt for an easy alternative and that is a joint home loan. This scheme allows you to apply with a co-borrower, who can be a parent, sibling, spouse, daughter, son, etc. Furthermore, with this plan, you and the co-borrower can ace the loan eligibility. Because there’s a share in the responsibility for repayments, lenders often grant higher loan amounts. A joint home loan also provides tax benefits to the individuals involved. Many banks offer up to 3.5 lakh tax benefits on joint home loans.
All joint owners can get a joint home loan tax benefit. It is important to highlight that ‘ownership’ of the property allows you to take advantage of every tax benefit related to the property. You might have applied for a joint loan, but unless you both are property owners, you cannot avail of tax-related benefits. For example, you and your child can take a joint home loan but if your child is not the co-owner then neither of you can enjoy the tax benefit rights. Saving tax is one of the most satisfying advantages of taking a joint home loan. It also aids in the purchase of an investment property. In addition, if you obtain a house loan, you become eligible for tax deductions under Sections 80C and 24 of the Income Tax Act of 1961.
Conditions required while claiming tax benefits – joint home loan
Here is this article, we will have a detailed look at the conditions required while claiming tax benefits on joint home loans.
You should be a co-owner
You must own the property to claim advantages on tax for a home loan. Many times, both persons take joint loans, but on the records, the applicant is not registered as a co-owner. You cannot claim tax-related benefits in such a circumstance.
You must be a co-debtor of the loan
According to the loan documents, you must be both an owner and an applicant. Owners that are not debtors and also do not pay the EMI will not be eligible for the tax breaks.
Finish the construction of the property
You can claim tax benefits over a residential area, to begin with, during the fiscal year when the property is fully completed. Places under construction are not eligible for tax reductions. Expenditures borne before completion, are claimed in 5 equal payments starting with the year in which construction is completed.
Types of tax benefits on joint home loan
Now that you know on what grounds you can claim tax benefits, let’s see the different types of tax benefits you can claim on a joint home loan. There are two sorts of tax benefits that may be obtained in connection with a shared home loan.
- The interest charged on the house loan is eligible for a tax break of up to Rs. 2 lakhs from the individual’s income for each year of the repayment period. This provision is provided under Section 24 of the Income Tax Regulations and is applicable, for example, whether the house is self-occupied or has a single owner with vacant property.
- Tax relief is offered on loan repayments of up to Rs. 1.50 lakhs in principal. Section 80C of the Income Tax Act makes this provision available.
If the building is jointly owned and your interest outgo exceeds Rs 2,00,000/year, you can claim a greater tax advantage against the home loan interest paid, as a family. You may be paying the whole loan instalment while the co-borrower is not contributing anything. In such a circumstance, you may deduct the whole amount of interest on your tax return. Joint owners can claim registration charges and stamp duty of a property.
A joint home loan is a great way to save taxes, especially when you don’t qualify for the home loan eligibility alone. Make sure you and the co-borrower have ownership rights on the property so that you can claim tax benefits. Also, joint home loans help you invest in a fixed asset as per convenience. However, as co-owners and co-borrowers, you are bound to pay EMIs together to enjoy proper tax benefits. In case, your co-borrower is not contributing to anything you can deduct the entire interest amount on your tax returns. Hopefully, this guide has helped you in understanding your tax benefits on joint home loans. So, next time if you don’t qualify for a regular home loan, opt for this alternative.