How to Avail Tax Benefits on Joint Home Loans

Did you know that taking a joint home loan with your spouse or a family member can offer significant tax benefits? In this article, we will explore the various tax benefits on joint home loans and how you can make the most of them. So, let's dive in!

Tax Benefits on Joint Home Loans

Taking joint home loans for your home offers several advantages, including tax deductions on both the principal and interest amount. When two for a home loan together, they become co-borrowers and co-owners of the property. This arrangement allows them to share both the responsibility and benefits of the loan.

1. Tax Deductions on Interest Paid

   As per Section 24(b) of the Income Tax Act, individuals can claim tax deductions up to ₹2 lakh per year on the interest paid towards their home loan. In the case of joint home loans, each co-applicant can claim this deduction individually. This means that if you and your spouse are co-borrowers, both of you can claim up to ₹2 lakh each. Please note that this is applicable for buying or constructing a new house, which must be completed within 5 years from the financial year end in which the loan was availed.

    

2. Tax Deductions on Principal Repayment and Stamp Duty

   Under Section 80C of the Income Tax Act, individuals are eligible for tax deductions up to ₹1.5 lakh per year on the principal repayment and stamp duty of their home loan. This is applicable only if the construction of the property is complete. Please note that tax benefits under Section 80C won’t be available if the property is sold within 5 years from the end of the financial year pertaining to the possession of the property. 

    

3. Tax Benefits under Section 80EE

   Apart from the above two, first-time homebuyers can claim an additional deduction under Sec80EE of up to ₹50,000 on interest payments, provided the property value does not exceed ₹50 lakh and the loan amount is within ₹35 lakh. There’s another criteria that should be met – the loan should have been sanctioned between 1st April 2016 to 31st March 2017.

    

4. Tax Benefits under Section 80EEA

   You can claim additional tax benefits up to ₹1.5 lakh under Section 80EEA only if the stamp value of the property is equivalent to or lower than ₹45 lakh. Additionally, the loan should have been sanctioned between 1 April 2019 and 31 March 2022. Also, you cannot claim tax benefits under Section 80EEA if you’re eligible for tax deductions under Section 80EE.

    

How to Make the Most of Tax Benefits on Joint Home Loans

Now that we understand the concept of tax benefits on joint home loans let's explore how you can avail these benefits:

1. Ensure Joint Ownership

   To qualify for tax benefits on joint home loans, all co-borrowers must be co-owners of the property. This means that the property's ownership should be in the names of all the individuals applying for the loan.

    

2. Calculate Tax Benefits

   Before submitting your tax returns, calculate the tax benefits you are eligible for based on your joint home loan. Consider consulting a tax professional or using an online tax calculator to accurately determine your deductions.

    

3. Maintain Proper Documentation

   It is essential to maintain proper documentation, including home loan agreements, repayment schedules, and interest certificates. These documents act as proof and support your claim for tax benefits.

    

4. File Separate Tax Returns

   While joint loan borrowers can individually claim tax benefits, it is important to file separate tax returns and provide the necessary details regarding the loan and deductions claimed.

Scenario 1: Mr. and Mrs. Kapoor's joint loan for a home

To illustrate how tax benefits work on joint loans for a home, let's consider the case of Mr. and Mrs. Kapoor.

Mr. Kapoor takes a home loan of ₹60 lakh with an annual interest payment of ₹6 lakh. Mrs. Kapoor is also a co-borrower and co-owner.

Tax Benefits Calculation: As per Section 24(b), both Mr. and Mrs. Kapoor can claim a deduction of up to ₹2 lakh each towards the interest paid on their joint home loan.

Separately, they can claim deduction of Rs 1.5 lakh each under SEC80C. Considering these deductions, Mr. Kapoor's taxable income reduces by ₹3.5 lakh (₹2 lakh + ₹1.5 lakh), and Mrs. Kapoor's taxable income reduces by ₹3.5 lakh as well.

Together, they can save up to ₹7 lakh as tax deductions on home loans.