Home Loan & joint Owners

Home Loan & joint Owners

August 18, 2018 0 By mkjjha1981

Tax Benefits on Home Loans for Joint Owners

The joint owners, who are also co-borrowers of a self-occupied house property, can claim a deduction on interest on the home loan up to Rs 2 lakhs each. And deduction on principal repayments, including a deduction for stamp duty and registration charges under Section 80C within the overall limit of Rs. 1.5 lakhs for each of the joint owners. These deductions are allowed to be claimed in the same ratio as that of the ownership share in the property.

You may have taken the loan jointly, but unless you are an owner in the property – you are not entitled to the tax benefits. There have been situations where the property is owned by a parent and the parent and 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 claim the tax benefits on the property:

  1. You must be a co-owner in the property
  2. You must be a co-borrower for the loan

Since, 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 year.

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 an 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 on your Income Tax Return.

  1. HRA and Deduction on Home Loan

Yes, you can enjoy both tax benefits if your employer provides you with an HRA component as part of your salary and you are repaying your home loan.

Scenario 1:

You work in a city, where you live in a rented accommodation and you bought a house in your hometown.

Arjun works in Gurgaon, but his wife and children live in Sonepat. He recently bought a house in Sonepat on a loan while he continues to live on rent.

Arjun can claim:

  • HRA for rent he pays for the house in Gurgaon,
  • and deduction on interest up to Rs 2,00,000 on the home loan

Scenario 2:

You live in a rented accommodation since your house is too small for your needs

Raghav lives in a rented house in Noida since his son’s school and his wife’s office are in Noida, his own house on the outskirts of Delhi is smaller and is lying vacant. He is paying interest on the loan on his own house.

Raghav can claim:

  • HRA for rent he pays for the house in Noida,
  • and deduction on interest up to Rs 2,00,000 on the home loan

Scenario 3:

You live in a rented house; your own house is also let out

Neha recently bought a flat in Indore, though she lives and works in Bangalore. She has no plans of returning to Indore in the next five years so she gives that flat on rent. She lives on rent in Bangalore.

Neha can claim:

  • HRA rent she pays for the house in Bangalore
  • Entire interest on the home loan fully exempt from tax