Tax benefits on a joint home loan can be availed by all the joint owners. Provided certain conditions are met. Let’s take a look.
Tax benefits on a joint home loan are available to all the joint owners. It’s pertinent to note that ‘ownership’ in the property is a pre-requisite to availing any tax benefits against the property. You may have taken the loan jointly, but unless you are an owner in the property – you may not be entitled to the tax benefits. There have been situations where the property is owned by a parent and the parent & child together take up a loan which is paid off only by the child. In such a case the child, who is not a co-owner is devoid of the tax benefits on the home loan. Therefore to be able to claim the tax benefits on the property –
- You must be a co-owner in the property
- You must be a co-borrower for the loan
When these conditions are met, the tax benefits that can be claimed in financial year 2014-15 & 2015-16 are –
- For a self occupied property – Each co-owner, who is also a co-applicant in the loan, can claim a maximum deduction Rs 2,00,000 for interest on the home loan in their Income Tax Return. The total interest paid on the loan is allocated to the owners in the ratio of their ownership. Each owner/borrower can claim interest benefit upto a maximum of Rs 2,00,000. Goes without saying, the total interest claimed by the owners/borrowers cannot exceed the total interest paid for the loan. Let’s understand Rahul and his father bought a house on loan and paid Rs 4,50,000 in interest. They have a 50:50 share in the property. Rahul can claim Rs 2,00,000 in his tax return, his father can also claim Rs 2,00,000.
- For a rented property – For a property which is given on rent the entire interest can be claimed as a deduction. In the above example, Rahul can claim Rs 2,25,000 in his tax return towards interest and the remaining 50% can be claimed by his father. (the only difference in case of rented property is that there is no cap in the max interest that can be claimed by each).
- Each co-owner, can claim a deduction of maximum Rs 1,50,000 towards repayment of principal under section 80C. This is within the overall limit of Rs 1,50,000 of Section 80C.
Therefore, as a family you will be able to take a larger tax benefit against the interest paid on the home loan when the property is jointly owned and your interest outgo is more than Rs 2,00,000 per annum.
It’s important to note that the tax benefit of both the deduction on home loan interest and principal repayment under section 80C can only be claimed once the construction of the property is complete. These benefits are not available for a under construction property.
There may be a situation where you are paying the entire loan installment and the co-borrower is not contributing any payments. In such a case, you may claim the entire interest as a deduction in your Income Tax Return.