Claiming tax benefits on joint home loans can significantly reduce your tax liability, especially when multiple borrowers are involved. In a joint home loan, both co-owners are eligible to claim deductions under the relevant sections of the Income Tax Act, provided they meet certain conditions. To effectively claim these benefits, it’s essential to understand the eligibility criteria and how deductions are apportioned between the co-owners.

Tax Benefits on Joint Home Loans

Tax benefits on joint home loans allow each co-borrower, who is also a co-owner of the property, to claim deductions on the principal and interest paid towards the loan, thereby reducing their overall tax liability. Under Section 80C and Section 24(b) of the Income Tax Act, each borrower can claim a share of the deductions based on their repayment contribution. This makes joint home loans an attractive option for spouses or family members looking to maximise tax savings while securing a home together.

Types of Tax Benefits for Joint Housing Loan

To understand the tax benefits better, here is a brief overview of the different types you must know:

Tax Benefits for Self-Occupied Property For a self-occupied property, joint home loan borrowers can claim tax benefits on both principal repayment and interest paid. Under Section 80C, each co-borrower, who is also a co-owner, can claim a deduction of up to INR 1.5 lakh per year on the principal repayment. This benefit is available only if the property is not sold within five years from the end of the financial year in which possession was taken. Under Section 24(b), each borrower can claim up to INR 2 lakh per year on the interest paid for the loan. Thus, if both co-borrowers jointly contribute towards repayment, they can together claim a maximum deduction of INR 3.5 lakhs per year.

Tax Benefits for Rented Property For a rented property, the tax treatment differs slightly. Under Section 24(b), there is no upper limit on the interest deduction for a rented-out property. Borrowers can claim the entire interest paid as a deduction, but the maximum loss from house property that can be set off against other income is capped at INR 2 lakhs per year. Any remaining loss can be carried forward for up to eight financial years and adjusted against future rental income. Under Section 80C, the deduction of INR 1.5 lakh on principal repayment remains the same as for a self-occupied property.

Note that Section 80C and 24(b) deductions are only available under the Old Tax Regime.

Things You Should Know About Tax Benefits Against Joint Home Loans

Beyond sharing financial responsibilities, a joint home loan presents significant tax benefits applicable to co-applicants:

• The collaborative approach enables co-applicants to avail themselves of tax deductions under a single home loan, reducing their overall tax burden.
• The division of tax benefits is directly linked to each borrower’s share in the property and loan. Each co-applicant is entitled to claim a maximum tax deduction of up to INR 1.5 lakh for principal repayment and INR 2 lakhs for interest paid on the home loan, in accordance with their respective ownership proportions.
• To qualify for tax benefits on a joint home loan, the loan must be taken in the names of two or more individuals who are also co-owners of the property. It is essential to have clear documentation specifying the ownership percentage of each co-borrower, as this determines how the tax deductions are divided. Proper documentation ensures that both parties can claim their fair share of tax benefits.

Conditions for Claiming Tax Benefits on Joint Home Loans

• To claim tax benefits on a joint home loan, both individuals must be co-owners of the property. This means that both parties should have a legal share in the property, which entitles them to claim deductions on the principal and interest repayment. If one person is not an owner, they will not be eligible for tax benefits, even if they are a co-borrower on the loan.
• Tax benefits are only applicable if both individuals are co-borrowers on the home loan. This ensures that both parties are legally responsible for repaying the loan. Even if one person is a co-owner but not a co-borrower, they cannot claim the tax benefits. Therefore, both borrowers must be actively involved in repaying the loan to be eligible for deductions.
• To claim tax benefits on a joint home loan, the construction of the property should be complete, or the property should be ready for possession. If the property is still under construction, tax deductions on the principal and interest might be limited or delayed until the property is ready for occupation.

Maximum Income Tax Exemption Benefit That Can be Availed on Home Loans by Joint Owners

First-time homebuyers can avail of an extra deduction of up to INR 50,000 under Section 80EE, applicable if the loan is sanctioned between 1st April 2016 and 31st March 2017 and the property value does not exceed INR 50 lakhs.

Further, under Section 80EEA, an additional deduction of up to INR 1.5 lakh on interest paid is available for first-time homebuyers who have taken a loan sanctioned between 1st April 2019 and 31st March 2022, provided the property’s stamp duty value does not exceed INR 45 lakhs.

These deductions can be claimed over and above the benefits under Sections 80C and 24(b), helping joint borrowers reduce their overall tax liability significantly.

Who Can Apply for Joint Home Loan Tax Benefits

In India, individuals who jointly own a property and are co-borrowers of a home loan can apply for tax benefits. Both co-owners must be co-applicants on the loan to claim deductions. It is important that each co-borrower files their own tax return and reports their share of the loan repayment to avail of these benefits.

Conclusion

Joint home loans provide an effective way to maximise tax benefits while sharing the financial responsibilities of homeownership. By combining incomes, co-applicants can increase their loan eligibility and claim individual tax deductions on both principal and interest payments. This collaboration not only reduces the tax burden but also encourages financial teamwork among couples, families, or friends.

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