When you buy a home, only one person doesn’t need to own the home — in India, up to 6 people can co-own a home. Thus, a home loan application can have more than one co-applicant.
For example, a husband and his wife can be co-owners of a house and at the same time, they can also be co-borrowers or joint home loan applicants. However, it’s always better to check with your chosen lender the confirmed applicant combinations allowed for the joint home loan. Opting for a joint home loan is a good idea if you wish to reduce the burden of financial obligation on a single individual.
Further, when it comes to availing of tax benefits on a home loan both the applicants can claim tax benefits on joint home loan individually; if your wife is the first co-applicant in the loan then you can avail an additional benefit on the home loan interest rate. Opting for a joint home loan is also a good idea when one cannot me the eligibility criteria set by the chosen lender alone. Furthermore,
Under the Income Tax Act, an applicant can claim tax benefits on a home loan. Some of the points to keep in mind to be eligible for tax benefits in the case of a joint home loan have been discussed below.
Co-Borrower Must Also Be The Co-Owner
For claiming tax benefits in the case of a joint home loan, the basic requirement that needs to be fulfilled is that the co-borrower in the home loan must also be the co-owner of the property. Unless this basic condition is met one cannot claim tax benefit on joint home loans. Although the tax benefits are claimed individually, each applicant is taxed as per their share in the given property.
Many times, individuals might add their family members, such as a spouse, parent, etc., as co-applicants in the home loan to increase their loan amount eligibility, they might not necessarily be the co-owners of the property. In such a case, the co-borrower in the joint home loan who is not a co-owner will not be able to claim tax benefit on the home loan. Hence, for this reason, the tax benefit on a joint home loan is claimed individually.
In case if one of the two joint owners wishes to claim tax benefits on the full amount, the claimant must obtain a No Objection Certificate (NOC) from their co-borrower. Further, the co-borrower must mention their will to forfeit the tax benefit by specifying the amount.
Property Must Be Fully Constructed
Claiming tax benefit on a joint home loan is possible only when the property is completely constructed. The tax benefit on a joint loan can be availed of for a period of up to 5 years. Borrowers can claim tax benefits from the financial year the property is fully constructed.
In some cases, one of the co-borrower who is also a co-owner of the house may not be servicing the home loan. In such a case, the co-borrower cannot claim tax benefit on this joint home loan because as per tax laws, the benefits are passed only to individuals as per the amount paid by the co-borrowers and co-owners. Therefore, tax benefits are provided on basis of the ratio in which joint applicants are servicing the loan.
A home loan consists of two components principal amount and interest amount. Once you meet the eligibility criteria for a joint home loan then, one can enjoy tax benefits on both these components.
Tax Benefit on Interest Deduction
Under Section 24 of the Income Tax Act, each applicant can claim tax benefit on interest paid up to Rs.2 lakhs for a self-occupied house. One needs to also remember that this benefit is applicable only on fully constructed properties and not on properties that are under construction.
Tax Benefit on Principal Repayment
Under Section 80C of the Income Tax Act, applicants can claim a tax benefit on repayment of the principal amount for up to Rs.1.5 lakhs of the loan amount.
Under section 80EEA, income tax benefits are available to those availing home loan under the PMAY CLSS scheme for first time home buyers.
Under section 80EE, first-time homebuyers can avail of an additional tax benefit of Rs.50,000 on payable interest. However, the home loan amount cannot exceed Rs.35 lakhs and the property value should be within Rs.50 Lakhs.
In the case of a joint home loan, co-owners and co-borrowers can claim individual tax benefits. In this scenario, the capped amount increases to Rs.4 lakh and Rs.3 lakh, respectively, by adding both the individual claims, provided both the applicant have an equal ratio in the loan repayment and the ownership of the property. Additionally, the tax benefit can also be availed on stamp duty and registration fees only once for the payment made in the same year.
Now that you know everything there is to know about how to avail of tax benefits in the case of joint home loans, save some money if you are a co-owner and co-borrower by way of the various statutes under the Income Tax Act.