pnb housing
April 7th, 2022

How to Avail Tax Benefits on a Joint Home Loan (3 Possible Ways)

How to Avail Tax Benefits on a Joint Home Loan (3 Possible Ways)

One of the most enticing perks of taking out a housing loan is the ability to save money on taxes. It also aids in the purchase of a fixed asset. If you obtain a home loan, you also become subject to tax benefits under the Income Tax Act Section 24 and Section 80C, 1961. Here, taking a joint home loan also brings many tax benefits to the table.

The joint home loan tax benefit is distributed among the co-applicants. Thus, more than one individual might profit. The applicant can receive a tax relaxation of around Rs.1.50 lakh per person. It will only work for debts taken out by two people. There are several advantages to buying a property under co-ownership. However, the most significant benefit of a combined property loan is that this loan provides more tax benefits, resulting in greater savings.

Tax Benefits on Joint Home Loans: What You Should Know?

For shared house loans, the tax benefits are split among the co-borrowers. It means that the tax deductions can be shared, especially if the annual payment on the home loan can be shared. That, too, with a single product, namely a house loan.

  • The fraction of tax deduction is determined by the loan’s ownership proportion.
  • Each candidate has the authority to claim the maximum tax refund through the house loan, which is Rs. 1.50 lakh per person and around Rs. 2 lakhs for principal repayment.
  • The most significant need for tax exemption and joint house loans is that the loan must be carried out in the names of two people.
  • Naturally, each individual’s share of the joint loan ownership should be explicitly stated in the paperwork in percentages for the co-owners.

Must Read: Tips on Applying for A Joint Home Loan

Conditions for Obtaining Tax Benefit on Home Loan for Joint Owners 

The three situations in which you can receive tax advantages on jointly held properties are outlined below:

1. You Must Be One of the Property’s Co-Owners

You should be the property owner to receive tax advantages for a joint home loan. According to the property documentation, although the borrower is not the official owner, loans are frequently taken out jointly. You may not be able to claim tax benefits in this situation.

2. You Must Join the Loan as a Co-Borrower 

Tax benefits will be applicable to applicants who are repaying the loan jointly. 

3. The Property’s Construction Must be Completed

Tax advantages on a residential property may only be claimed from the beginning of the fiscal year in which the property is completed. An under-construction property does not qualify for tax incentives. Any expenditures incurred before completion, on the other hand, are claimed in equal payments beginning the year in which the building is completed.

What are the Joint Home Loan Tax Advantages?

1. For a Self-Contained Dwelling 

In their Income Tax Return, each co-owner who is a loan co-applicant can claim a maximum tax deduction of Rs 2 Lakh for interest on the loan. The entire interest paid is divided among the owners in proportion to their stake in the property. The borrowers’ or owners’ total interest claim cannot surpass the aggregate interest paid on the home loan tax benefit for joint applicant.

Let’s say Rahul and his son took out a loan to buy a property and paid Rs 4.5 Lakh in interest. They own the property in a 50:50 split. Rahul can claim Rs 2 Lakh in his tax return, and his son can also claim Rs 2 Lakh.

Must Read: What Are the Tax Benefits on Home Loans? How to Avail Them?

2. In the Case of a Rented House 

The amount of interest that may be deducted as a deduction for rental property is limited to the amount of loss from such property that does not surpass Rs 2 lakhs.

Section 80C allows each co-owner to get a maximum deduction of Rs 1.5 Lakh for principal repayment. It is under Section 80C’s total limit of Rs 1.5 Lakh.

As a result, if the house is jointly claimed and the interest outgo is Rs 2+ Lakh per year, you will be able to claim a bigger tax advantage against the interest paid on the loan as a family.

Bottom Line

As you have read above, there are multiple ways to obtain the tax benefits on a joint home loan. The joint property owners can also claim registration and stamp duty fees.

At PNB Housing, we offer comprehensive guidance to assist you in optimizing your tax benefits on home loan for joint owners.

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