Buying a home is a big decision, one that will impact your finances for years to come. A joint home loan with your spouse or a parent will help you not only avail of higher loan amounts but also avail of tax benefits provided you are co-owners. The Indian government allows tax benefits on a joint home loan to encourage and boost home ownership, in particular, female home ownership.

However, it must be reiterated here that joint home loan tax benefits are available only to co-owners and not co-applicants or co-borrowers. In other words, you may have taken the home loan jointly, but unless you are an owner of the property, you will not be entitled to tax benefits.

Joint Owners Must Meet These Conditions to be Eligible for Joint Home Loan Tax Benefits

Having co-applicants while applying for a home loan can strengthen the applicant’s eligibility as banks/lenders assess all the applicant’s creditworthiness and financial capacity while assessing the loan amount one is eligible for. Having a co-applicant with a good credit score can boost one’s chances of securing a home loan of a sizeable amount and help one buy the property of one’s dreams. In fact, the benefits of a joint home loan don’t just end there, having a co-applicant can help you sometimes secure a home loan with low-interest rates and flexible repayment options as well. The most important benefit of a joint home loan is the advantage of tax benefits to available each applicant.

However, three conditions must be fulfilled if you wish to avail of joint home loan tax benefits.

You Must Be One of the Co-Owners

To receive tax advantages for a joint home loan you must also be the co-owner of the property. Many times, a loan is taken out jointly by people, but the borrower may not necessarily be the owner of the property per the property documents. In such a case, the co-borrower cannot claim tax benefits if they are not a co-owner.

You Must be a Co-Borrower

Joint Home Loan Tax benefits will apply to applicants who are repaying the loan jointly or who are not just co-owners but are also co-borrowers of the home loan. Thus, to claim tax benefits on a Joint home loan one must be the co-owner of the property.

Property’s Construction Must be Complete

Tax advantages on a residential property can be claimed from the beginning of the financial year in which the property is completed. Tax benefits cannot be claimed for an under-construction property. All expenditures incurred before completion, on the other hand, are claimed in equal payments beginning the year in which the building is completed.

Facts About Tax Benefits on Joint Home Loans

Here are some important facts that all aspiring home loan applicants must know before they apply for a joint home loan to buy the house of their dreams:

• When it comes to joint home loan the benefits, the tax benefits are divided among co-applicants or co-borrowers. In other words, more than one person can enjoy tax benefits if the home loan has been availed of by more than one person.
• The division of tax exemption between the co-borrowers or co-owners is based on the ratio of the ownership of the loan.
• One of the most important conditions for tax exemption on a joint home loan is that the home loan must have been taken in the name of two individuals.
• The entitlement of everyone in such joint ownership should be mentioned clearly in legal papers in percentage for each of the co-owners to avoid future complications.

Types of Tax Benefits for Joint Home Loans

For a self-occupied property

Each co-owner, who is also a co-applicant/co-borrower in the loan, can claim a maximum deduction of Rs.2,00,000 for the interest portion of the home loan in their income tax return. The total interest paid on the loan is allocated to the owners in the ratio of their ownership of the property. This provision is available through Section 24 of the Income Tax regulations where the property is self-occupied or has single ownership with the property being vacant.

For a Rented Property

The amount of interest that may be deducted as a deduction for rental property is limited to the amount of loss from such property to a maximum of up to Rs.2 lakhs. Under joint home loans, each co-owner can claim a deduction of a maximum of Rs.1,50,000 towards repayment of principal under section 80C. This is within the maximum limit of Rs.1,50,000 of Section 80C. Thus, a joint home loan can help to claim a bigger tax advantage in such cases.

Sometimes, in situations like these when you are paying the entire loan instalment and the co-borrower is not making any payments, you may claim the entire interest as a deduction in your Income Tax Return. The stamp duty and registration charges made towards a property can also be claimed by the joint owners.

Summing Up

Thus, the bottom line is, if you buy a home jointly with a family member or your partner, you can avail of quite a few tax benefits as the Indian government encourages home ownership. So, if you want to buy a new home or move to a bigger home, it will be beneficial for you to apply for a joint home loan. Tax benefits you can avail of on such loans are quite attractive and can benefit both you and the co-owner or the co-applicant. Remember to collect the home loan NOC once you have closed the home loan to avoid any future complications.