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How To Claim Tax Benefits On Joint Home Loans

Joint home loans is always beneficial as your loan amount increases and your burden is also decreases as it is shared with the co-owner. That best part about joint home loans is both the owners can claim tax benefits. But in order to claim the tax benefit on your joint home loan you need to fulfil these following criteria:

You have to be a co-owner – To get complete guidelines, for taxation of your share in the jointly owned property do read Section 26 of the Income Tax Act. The foremost criteria for claiming tax benefits, is that you should be a co-borrower of the loan, as well as a joint owner of the property. So if a person simply joins another immediate family member (father, son or spouse), to enhance the loan amount eligibility but without having any share in the purchased property, he becomes the co-borrower but not the joint owner. In such case he can’t claim the tax benefits on such home loans. Therefore, it is recommended that you should buy the property in joint names so you can individually claim the tax benefits.

The ratio of home loan- It is not necessarily that the home loan may not necessarily be in the same ratio as your ownership of the house property. As the share in the home loan is crystallised at the time of purchase of the property, the home loan should be serviced in the ratio arrived at the time of the purchase. This share cannot be altered at any point later. You will get tax benefits in the proportion to your share in the loan. So, it is advisable for joint owners to get an ownership sharing agreement clearly mentioning the ownership ratio on a stamp paper as legal proof of the ownership.

Highest Tax benefit- A co-borrower who is earning well and is in the higher income tax slab rate can opt for higher share in ownership / Loan EMI. Home loan tax benefit is available for ready to move in property as tax benefits are not available for an under construction property. However, any expenses prior to completion are claimed in five equal instalments starting the year in which construction is complete.

Each joint owner and borrower can claim Rs.2 lakhs interest deduction - The share of ownership will allocate the total interest between them. If the percentage share is not specified, interest portion of the EMI is split equally and each of them can claim maximum up to Rs. 2lakhs in their return.

Joint owner can claim 80C deduction on principal repayment - Each of the co-owner; co-borrower can claim deduction towards principal component of the EMI under section 80C. Rs 1.5lakhs is the maximum deduction that is allowed under section 80C.

Each joint owner can split costs of registration and stamp duty and claim 80C deduction – Payment made towards registration and stamp duty is eligible for deduction under section 80C provided these are claimed in the year in which they are paid. To avail the maximum benefit owners should split these costs and claim. When your interest outgo is more than Rs 2lakhs per annum on a jointly owned property then as a family you can claim a larger tax benefit for the interest paid on home loan.

Joint benefit structure- When more than one person takes and repays a home loan it is referred as joint benefit. The co-applicants are mainly family members, which include husband and wife or father and son or father and daughter or mother and son or mother and daughter as the case may be. In such a situation, tax benefits have to be divided between all co-applicants and hence known as joint benefits.

When one should take Home Loan in Joint names- You should take the home loan in joint names only when you don’t have enough loan eligibility as single applicant. Join home loan gets you a bigger loan amount then your eligibility in Individual capacity.

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