Updated on: Mar 29th, 2024
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11 min read
Tax benefits on a joint home loan can be availed by all the joint owners, provided certain conditions are met. Let’s take a look.
Tax benefits on a joint home loan are available to all the joint owners. It’s pertinent to note that ‘ownership’ of the property is a prerequisite to availing any tax benefits against the property. You may have taken the loan jointly, but unless you are an owner of the property – you may not be entitled to the tax benefits.
There have been situations where the property is owned by a parent, and the parent & child together take up a loan which is paid off only by the child. In such a case, the child, who is not a co-owner, is devoid of the tax benefits on the home loan.
For example, Let’s understand Rahul and his father bought a house on loan and paid Rs 4,50,000 in interest. They have a 50:50 share in the property. Rahul can claim Rs 2,00,000 in his tax return, his father can also claim Rs 2,00,000.
For example, if the rental income is Rs. 600,000, Interest on the housing loan is Rs 12,00,000, and Salary income is Rs 15,00,000. Total Income will be as follows
Particular | Amount | Amount |
Income from Salary | 15,00,000 | |
Income from House Property | ||
Rental Income | 600,000 | |
Less: Standard deduction u/s 24(a) | (180,000) | |
Less : Interest on loan u/s 24(b) | (12,00,000) | |
Total | (7,80,000) | |
Income from House Property | (200,000) | |
Loss from House Property c/f to next year | (5,80,000) | |
Total Income | 13,00,000 |
Thus in the above example, you will observe that excess loss over Rs 200,000 will be carried forward to next year, and such loss in next year will be eligible to set off only against income from house property
Therefore, as a family, you will be able to take a larger tax benefit against the interest paid on the home loan when the property is jointly owned and your interest outgo is more than Rs 2,00,000 per annum.
There may be a situation where you are paying the entire loan instalment, and the co-borrower is not contributing any payments. In such a case, you may claim the entire interest as a deduction in your Income Tax Return.
Section 27 of the Income-tax Act explains the scenario of Deemed ownership. When an Individual transfer his property for other than adequate consideration
The person transferring such property will be deemed to be the full owner of the property as per the Act.
Example: Husband (who is a salaried individual) buys house property in Joint name with his wife (who is a Homemaker). The husband is the sole earner, and he pays the entire consideration for such acquisition. Now he lets out such property for rent. Now the question is, since the wife is also 50% owner of the property, can 50% of such rental income be shown in the wife's income tax return? Since the wife has no taxable income, this helps in paying no taxes on such 50% rental income. In such cases, income tax deems that the entire property belongs to the husband and rental income needs to be declared in his ITR only since the entire consideration for such purchase of the property was paid by the husband.
Both individuals need to be co-owners of the property to avail of tax benefits. The joint owners can claim a tax rebate on their proportion of shares. It means that a joint owner can consider his/her spouse’s repayment capacity when planning the share of a home loan.
Thus, even if joint owners are equal, but their loan share is 60:40, the tax benefits will also be shared in the same ratio. If this ratio is changed to 70:30, even tax benefits will change accordingly.
Stamp duty and registration charges of a property can also be claimed by the joint owners.
Related Articles
Tax benefits on a joint home loan are available to all joint owners if they meet specific conditions like ownership of the property and construction completion. Individuals can claim deductions for interest and principal repayments based on their share. Deemed ownership scenarios are considered for tax liabilities. Questions: What are conditions for joint owners to claim tax benefits? How are tax benefits distributed among joint owners? Can a change in loan repayment ratio affect tax benefits?