Tax Benefits for Joint Ownership of Home Loans

All the joint owners can avail of joint home loan tax benefits. It is crucial to note that property ownership is the prerequisite for availing any tax benefit against the property. Read the following to learn more.

Most home buyers opt for joint home loans to enhance their loan eligibility. Other than better eligibility, there are also home loan tax benefits for joint owners, which we will discuss in this article.

What Is a Joint Home Loan?

A joint home loan is a secured loan provided along with the co-borrower. Both borrowers will share equal financial responsibility to get the appropriate housing loan interest rates and tax benefits. Co-applicants are individuals who apply for a loan with a co-borrower.

According to the rules and regulations of lenders, a person can be a co-applicant if they are 18 years old or above and have a handsome income. Also, the relationship between the two borrowers opting for a joint home loan can be brothers, mother-son, husband-wife, or father-son.

Eligibility Criteria For Securing Home Loan

Individuals who want to opt for a joint home loan should meet the following eligibility criteria:

• Indian citizens over 18 with a minimum work experience of two years
• The minimum income of applicants must be INR 25,000
• Relationship Between Applicants: As per the Reserve Bank of India’s policies, the relatives who are eligible to become a co-applicant and take joint housing loans are spouses, mother-son, father-son, and brother-brother.
• Co-Applicants: Only six people or fewer can opt for the joint housing loan

Conditions For Home Loan Tax Benefit For Joint Owners

Remember that the basic condition for availing of applicable tax benefits is that both applicants must be the property owner; otherwise, they will not be eligible for home loan tax benefits for Joint owner.

Following are the conditions individuals with joint home loans have to fulfil to claim the joint housing loan tax benefits:

Both Applicants Must Be Property Owners

Those who are the property’s co-owner can claim the joint home loan tax benefits against the property. In cases where more than two individuals take a home loan, only those who are the registered owners of the property are eligible for the tax benefits of a joint housing loan. 

There are many cases in which a loan is borrowed jointly, but if you are not the property owner according to the legal documentation, you cannot claim the tax benefits.

Property Construction Must Be Completed

The construction of the property must be completed for which the home loans were secured to be eligible for the tax benefits. Borrowers can avail of the tax benefits from the beginning of the fiscal year in which the property construction has been completed.

 Properties under construction are not applicable for joint owners’ tax home loan benefits—expenditures made for the property before the construction can claim the completion in 5 instalments.

Both Should Be Co-Borrowers Of The Home Loan

The co-owners of the property against which a housing loan interest rate has been decided also have to be the co-borrowers to be eligible for the tax benefits. People who will not pay home loan’s EMI cannot claim tax benefits.

What Are Home Loan Tax Benefits For Joint Owners?

Borrowers holding joint home loans are eligible for the following tax benefits:

For A Rented Property

The total yearly payable interest against the rented property is a maximum of 2 lakhs according to the Income Tax Act 80C. If the borrower and their spouse decide to rent their property, the ratio at which the couple will share the yearly tax benefit will be the same. With this calculation, the couple will be eligible for the annual tax benefits of 1 lakh rupees each.

For Living In The Property

In instances where the property for which the loan was taken, each co-owner is eligible to claim the maximum annual tax deduction of up to 2 lakh rupees as their income tax return. The decided housing loan interest rate is assigned to the property owners based on ownership. Each co-owner can claim the tax benefit of up to 2 lakh rupees.

For instance, Mr. and Mrs. Sharma are the co-owners of a property and have applied for a joint home loan and paid 6 lakh rupees as interest. In this case, the couple can claim 2 lakh rupees as an annual tax benefit. If the total Housing loan interest rate is 3 lakh rupees, the applicable tax benefit would be 1.5 lakh rupees for each.

In a case where only you will be paying loan instalments without any contribution from the co-borrower, you will be eligible to claim the real interest as part of your income tax benefits.

Conclusion

In a nutshell, if you purchase a joint home loan with your spouse or family, you can claim the tax benefit as the Indian government encourages people to purchase houses. Remember that the basic condition for availing of applicable tax benefits is that both applicants must be the property owner; otherwise, they will not be eligible for home loan tax benefits for Joint owners.