InvestorQ : I have heard that joint home owners ger some tax benefits on home loans? Please explain.
Rohan Bhadani made post

I have heard that joint home owners ger some tax benefits on home loans? Please explain.

Samita Patil answered.
3 years ago

Yes, what you’ve heard is true. One can avail of tax benefits if he/she is the joint owner of the property. It is of immense importance to note that in order to avail any tax benefit against the property, one must also be the owner of the property.

There are numerous instances of when the loan for a property was jointly taken by a couple, but because only the husband was the owner of the property, the wife could not claim tax benefits of the joint loan.

Thus, you might have taken a joint loan, but unless you the owner of the property, you will not be entitled to any tax benefit

There are a number of pre-requisites that need to be fulfilled for you to be able to avail of tax benefits on join loans:

1. You must be the co-owner of the property: As stated above, being a co-applicant for a home loan is not enough for you to claim tax benefits of the joint loan. You have to be the owner of the property to claim tax benefits.

2. You must be a co-applicant for the joint loan: Merely being an owner isn’t enough if you want to get tax benefits. You must also be an applicant as per the loan documents. Owners who are not borrowers and do not contribute to the equated monthly instalments (EMIs) cannot claim any tax benefits.

3. The property should be completely constructed: You can get tax benefits on a house property in the financial year in which the construction of the property is completed. There are no tax benefits for under-construction property. However, expenses made prior to the property’s completion can be claimed in five equal instalments starting the year in which construction is complete.

Tax benefits that can be claimed:

The tax benefits that you can enjoy, if you are both the co-owner as well as the co-applicant, depends on who resides in the house:

- For a self-occupied property: A co-owner, who is also a co-applicant in the joint loan, can claim a maximum deduction of Rs. 2,00,000 for interest on the home loan in their income tax return (ITR). The total interest paid on the loan is allocated to the owners in the ratio of their ownership.

Each owner or borrower can claim interest benefit up to a maximum of Rs. 2,00,000. As is obvious, the total interest claimed by the owners or borrowers cannot exceed the total interest paid for the loan.

Let’s understand this with an example. Ankita and her mother bought a house on loan and paid Rs. 4,50,000 in interest. They both own 50:50 share in the property. In this case, Ankita as well as her mother can claim Rs. 2,00,000 in their respective tax returns.

- For a rented property: 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. 2,00,000 lakh.

Additionally, each co-owner, can claim a deduction of up to Rs. 1,50,000 towards repayment of principal amount under Section 80C of the Income Tax Act, 1961.

Thus, a family can take substantially more tax benefits 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.

If you are paying the entire loan instalment and the co-borrower is not contributing to any EMIs, you can claim the entire interest as a deduction in your Income Tax Return.

Do note that even the stamp duty and registration charges of a property can be claimed by the joint owners. Hope this helps!