Below are the conditions that individuals holding a joint home loan have to fulfil for claiming the applicable tax benefits:
Both have to be co-owners of the property: Only individuals who are co-owners of the property would be able to claim tax benefits on the home loan taken against the same property. On instances where a home loan has been taken by more than two individuals, when both of them are not registered owners of the property for which the home loan has been taken, both the borrowers will not be eligible for tax benefits on the home loan. Only the individual who is the registered owner of the property can avail the tax benefits on the home loan.
Both have to be co-borrowers of the home loan; Individuals who are the co-owners of the property against which a home loan has been applied for, also have to be co-borrowers of the loan to avail the applicable tax benefits. Borrowers who are not contributing to the home loan EMI will not be eligible for tax benefits on home loan for joint owners.
Property construction must be complete: The property on which the home loan has been taken will have to be completed to be eligible for tax benefits on home loan for joint owners. Tax benefits can be claimed from the starting of the financial year in which construction of the property has been completed. Tax benefits are not applicable for a property that is still under construction. Expenditures made towards the property before its completion can be claimed in five equal instalments, beginning from the year in which construction is complete.
Individuals holding joint home loans are eligible for availing the following tax benefits:
For a self-occupied property: In cases where the property against which a home loan has been taken, each of the co-owners who are also co-applicants of the home loan, can claim a maximum annual tax deduction up to Rs. 2 lakhs against the home loan as a part of their Income Tax Return. The total interest paid on the home loan is assigned to the property owners in the ratio of their ownership. Each of the co-owners can claim tax benefit of up to Rs. 2 lakhs.
For instance, Mr. Shah and his son are co-owners of a property, applied for a home loan together and paid Rs. 6 lakhs as interest. In that case, both the father and son can avail Rs. 2 lakhs each as annual tax benefit. If the total interest of the property they purchased was Rs. 3 lakhs, the applicable tax benefit would be Rs. 1.5 lakhs for each of them.
For a rented property: The total annual interest payable against a rented property against which a home loan has been taken is a maximum of Rs. 2 lakhs, as per Section 80C of the Income Tax Act, 1961. If Mr. Shah and his son decide to rent out their co-owned property, the ratio at which they will share the annual tax benefit will remain the same. By this calculation, they will be eligible for an annual tax benefit of Rs. 1 lakh each.
The practise of changing the loan amount is commonplace, especially during a cash crunch, arising from various instances - sudden loss of employment, hospitalisation due to illness or accident, study leave for pursuing a specialised educational course, pregnancy, or any other reasons. However, it is highly recommended that individuals not resort to changing the loan amount. Instead, other options like finding other family member or friend should be explored, so that the ratio of loan repayment remains constant throughout the home loan tenure.
Ans: There are 3 parameters for claiming tax benefits on a joint home loan:
Ans: Joint owners of a property who have opted for a joint home loan are eligible for availing a maximum annual tax deduction of Rs. 2 lakhs as Income Tax Returns. The total interest paid on the home loan is assigned to the property owners as per the ratio of their ownership. Each of the co-owners can avail tax benefits of a maximum of up to Rs. 2 lakhs.
Ans: The total annual interest that can be availed against a rented property against which a home loan has been taken is a maximum of Rs. 2 lakhs, according to Section 24(b) of the Income Tax Act, 1961. The benefit applicable on the principle of a home loan for a rented property, even when the property has more than one owner, is Rs. 1.5 Lakh. This implies that both the property owners can avail up to Rs. 1.5 lakhs each as annual tax benefit on their home loan.
Ans: The maximum tax benefit that joint owners of a rented property can avail on a home loan is Rs. 1.5 lakhs for each of the property owners on the principal component, as per Section 80C of the Income Tax Act, 1961.
