Buying a home is a big milestone, and most aspiring home buyers opt for a joint home loan to enhance eligibility and make the financial aspect easier. Joint home loans can be applied in conjunction with your spouse or other family members provided they meet certain criteria like a good credit score, age, income and other factors. Most importantly, joint home loans have multiple tax benefits. We give you the complete lowdown on how to claim those tax benefits.
Important conditions to know before claiming tax benefits
In order to be eligible for tax benefits, there are certain conditions that you need to meet.
Co-borrower is also co-owner
Many prospective home buyers who go in for a joint home loan are unaware of the fact that a co-borrower must also be the co-owner of the property for you to be able to claim individual tax benefits. If you are only a co-borrower, you will not be eligible for tax deductions even if you have been paying half of the EMIs.
Loan repayment is a must
You may be a co-owner and a co-borrower, but if you are not involved in the payment of the loan, you will not be eligible for tax benefits. It is also important that there is a clear understanding of each person’s share of the loan in the whole transaction. This must be decided upon and fixed when the property is purchased and cannot be changed later as it determines the tax benefits the person avails.
Property should not be under construction
With many developers offering attractive rates and other goodies for purchasing houses under construction, most homebuyers prefer to wait out the period until the promised possession date.
However, the loan repayment clicks in as soon as the last dotted line has been signed. The good news is that there are tax benefits to be had, which can be claimed after the property is fully constructed. Taxes can be claimed for up to five years, but the amount is limited to Rs 2 Lakh.
Joint home loan tax benefits mainly fall under two sections of the Income Tax Act.
Section 24 – is where you claim your tax benefits for interest paid for up to Rs 2 Lakh.
Section 80C – is where you claim tax benefits for repayment of the principal amount for up to Rs 1.5 Lakh.
With a joint home loan, co-borrowers and co-owners can claim individual tax benefits. This brings the total capped amount to Rs 4 Lakh and Rs 3 Lakh respectively, provided the ratio of ownership and repayment are in equal proportions of 50:50. However, the ratio can be changed to suit the incomes and tax slabs of the two borrowers and owners.
