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Tax Benefits on Home Loan for Joint Owners

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Budget 2021 update :It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
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’ in the property is a pre-requisite to availing any tax benefits against the property. You may have taken the loan jointly, but unless you are an owner in 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. Therefore to be able to claim the tax benefits on the property –
  • You must be a co-owner in the property– To be able to claim tax benefits for a home loan, you must be an owner in the property. Many a time, a loan is taken jointly, but the borrower is not an owner as per the property documents. In such a case you may not be able to claim tax benefits.
  • You must be a co-borrower for the loan –Besides being an owner, you must also be an applicant as per the loan documents. Owners who are not borrowers and do not contribute to the EMI shall be devoid of the tax benefits.
  • The construction of the property must be complete – Tax benefits on a house property can only be claimed, starting the financial year in which construction of the property is complete. Tax benefits are not available for an under construction property. However, any expenses prior to completion are claimed in five equal instalments starting the year in which construction is complete.
When these conditions are met, the following tax benefits can be claimed  –
  • For a self-occupied property – Each co-owner, who is also a co-applicant in the loan, can claim a maximum deduction Rs 2,00,000 for interest on 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. Each owner/borrower can claim interest benefit up to a maximum of Rs 2,00,000. Goes without saying, the total interest claimed by the owners/borrowers cannot exceed the total interest paid for the loan. 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 a rented property – In the budget 2017, the interest that can be claimed as a deduction in case of rented property is  restricted to the amount to which loss from such house property does not exceed Rs 2 lakhs.To understand more on this , read Tax benefits on home loan for rented .
  • Each co-owner, can claim a deduction of maximum Rs 1,50,000 towards repayment of principal under section 80C. This is within the overall limit of Rs 1,50,000 of Section 80C.
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. Stamp duty and registration charges of a property can also be claimed by the joint owners. We have a detailed guide to help you maximize your tax benefits when you are the owner of a house property.

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