Joint home loans to enhance Home Buyer’s eligibility. The repayment of the loan and claiming of tax benefits on such loans has to be done in a particular ratio. We explain…
Home Loan Council in Hyderabad
The tax laws allow you to avail certain benefits with respect to respect home loans. The benefits are available under Section 24(b) for interest paid and under Section 80C for the principal repayment, subject to certain conditions. Couples usually opt for a joint home loan, as this can enhance their home loan eligibility. However, there is considerable confusion, about who can claim the home loan benefit and how much tax benefit one can claim, with respect to joint home loans.
Co-borrowers vs co-owners
Section 26 of the Income Tax Act, gives clear-cut guidelines, for taxation of your share in the jointly owned property. In case of a joint ownership of any house property, you are taxed as an individual with respect to your share in the property. So, if your share in the joint property is certain or ascertainable, you cannot be taxed as a Body of Individual (BOI) or Association of persons (AOP).
A basic condition for claiming tax benefits, is that you should be a co-borrower of the loan, as well as a joint owner of the property. Unless you satisfy this basic condition, you cannot claim the tax benefits on the home loan. In certain cases, a person merely joins another immediate family member (father, son or spouse), to enhance the loan amount eligibility, without having any share in the property purchased. In such cases, the co-borrower, who is not a joint owner of the property, cannot claim the tax benefits on such home loans. This is one of the reasons that you should buy the property in joint names and then, individually claim the tax benefits.
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Claiming ratio of tax exemptions in Joint home loans
It may also happen that you may be a joint owner, as well as a co-borrower but are not servicing the home loan. In such a situation, you cannot claim the tax benefits on the home loan, as the tax benefits are available with respect to the amounts paid by you.