A joint home loan is generally taken to enhance home loan eligibility. If your immediate family member is salaried or self-employed, he or she can be co-applicant for a home loan. In order to become co-applicant, he/she should be co-owner or joint owner of the property.
Recently, I have come across one incident related to Home Loan. One of my colleagues had purchased a flat in his name by taking a home loan. He started paying off EMI from his salary. At a later stage, his wife has also started a job and earning a decent income. He wanted to save tax from his wife’s income by paying EMI of home loan. However, as he has not taken a joint home loan his wife could not claim the income tax benefit.
There are many incidents like this where people are not aware of Joint Home Loan tax benefits or due to lack of future vision, they purchase property on a single name by taking a home loan. To help them here is complete information about Joint Home loan including associated benefits.
Also Read – 10 Best Bank for Home Loan in India
Prerequisite to claim Tax Benefits on Property
- You must be a co-owner in the property – You must be an owner in the property to apply for tax benefits. A loan should be taken jointly. If you are not the owner of a property you cannot claim tax benefits.
- You must be a co-borrower for the loan – The home loan should be taken as a joint home loan as a co-borrower. A co-borrower not contributing to the EMI cannot claim any tax benefits.
- The construction of the property must be completed – The construction of the property should be completed. Tax benefits are not extended for under-construction properties.
Who can be Co-borrower or Co-owner in Joint Home Loan?
Anyone can be co-owner of the property. No law governs who can be added as a joint owner. However, generally, close relatives such as brother, father, mother, son, daughter, and spouse can be co-owner of the property.
Only close relatives are allowed to apply for a joint loan as a co-borrower. Friends, sisters or live in partner without marriage are not allowed to apply for a joint home loan.
Joint Home Loan & Tax Benefits – Section 80C, 24 & 80EEA
You must be aware that EMI component of home loan repayment is divided in two parts. Repayment of principal component and interest component. The tax benefit is extended on both principal and interest repayment.
Section 80C – Tax Benefits on Principal Component
Section 80C of the income tax allows tax deduction up to 1.5 Lakh. The tax deduction is allowed for the amount invested under various tax saving instruments such as PPF, Tax Saving FD, ELSS, NSC as well as home loan principal payment.
Under a joint home loan, the repayment amount is divided as per ownership share. If a property is held by two people with 50% ownership rights the total repayment amount will be divided into two parts. Both owners can claim tax benefits on principal repayment under section 80C up to 1.5 Lakh.
The amount paid as stamp duty and the registration fee is also allowed as tax deduction under Section 80C even if a home loan is taken or not.
The benefit of home loan principal repayment is extended only after the construction is completed and the competition certificate is awarded. A tax benefit is not allowed for under-construction property.
Section 24 – Tax Benefits on Interest Component
Section 24 allows tax benefit on the interest component of home loan. The maximum tax deduction allowed under section 24 for the self-occupied property is 2 Lakh.
If a property is not self-occupied there is no maximum limit on the claim amount. The taxpayer can claim the entire interest repayment amount under section 24.
In case of joint home loan, both co-owner can get benefit up to 2 Lakh in case of self-occupied property.
The construction of property should be completed within 5 years after taking loan. If the construction of property is not completed within 5 years otherwise maximum interest amount allowed for tax deduction would be Rs.30000.
Section 80EE – Tax Benefits for First Time Buyers
In the budget 2019, a new provision under section 80EE is added for the first time home buyers. As per the new provision of section 80EE, new deduction of 1.5 Lakh is allowed for interest payment on home loan.
The additional deduction is allowed from the financial year 2019-20 onwards. This deduction is on the top of the existing section 80C and section 24 tax benefit.
This benefit is given only for the first time buyer and for the loan sanction period from 1st April 2019 to 31st March 2020. Additionally, the stamp value of the property should not exceed 45 Lakh.
The amount mentioned above is per person. This means in case of a joint home loan, each person repaying amount will get the benefit of above section separately.
You required to furnish home loan statement issued by the bank to claim the tax deductions.
FAQ on Joint Home Loan
We have purchased joint property and taken Joint Home loan. My husband is paying entire home loan EMI from his account. Can both us claim tax benefits?
As entire home loan EMI is paid by your husband from his account, he will only able to claim income tax benefit under section 80C and section 24.
I and my wife was paying EMI of flat in equal proportion as joint property holder. My wife is not working now and Entire EMI is paid from my account. Can I claim entire tax benefit?
If you are a co-owner of the property and are repaying the entire loan then you will be eligible for 100% tax benefits under section 80C and section 24.
I and my wife is holding 50-50 ownership in the property. I am paying 75% of the EMI and she is paying remaining 25%. Can I claim 75% deduction on interest and 50% on principal payments?
No, you can either claim benefit in proportion of ownership, or in proportion of contribution to EMI. You can claim 100% only if other borrower is not contributing and you are paying 100% of EMI.