Joint Home Loan Tax Benefits: Frequently Asked Questions
Updated on December 28, 20188 mins read
The primary function of a joint home loan is to increase your loan eligibility and distribute the repayment burden. This serves an easy way out for several young professionals and newly married couples who dream of owning their own house. The most noteworthy feature of joint home loans is that all co-applicants are eligible for simultaneous tax rebates for their EMI payments, stamp duty and registration fees. These deductions have a maximum limit of 1.5 lakhs for principal repayments and 2 lakhs for interest payments and this is applicable for each individual applicant, maximising the benefits manifolds. To avail these tax benefits, every co-borrower must be a co-owner of property too. Do keep in mind that the tax slabs get revised in the beginning of every financial year, this could impact your tax savings and income.
What is the best way to avail these tax benefits?
Incomes of all borrowers play an important role in maximizing tax benefits. For example, if you and your spouse earn similar incomes,then its best for you to go for 50:50 ownership of property and divide the benefits in same proportion. In case your spouse earns less than you, then you can make a higher contribution to the home loan. This will lead to better tax benefit collectively.
Several of our customers have come up with queries on the tax benefits they can enjoy by taking joint home loans. So, here are a few FAQs to help you understand the tax aspects better:
1. Can a co-applicant of joint home loan get IT benefits? What documents are required?
Yes! If a co-applicant is also a co-owner of property, then he can avail full tax benefits. For this purpose you must have the following documents:
House registration certificate
Stamp paper and registration fees receipts with names of all co-borrowers
Certificate of Interest from bank with names of all co-borrowers contributing to EMI
Legal proof of share of ownership on stamp paper
2. I have taken home loan with my wife as co-owner. Since she is a house wife, I am repaying the entire loan. So will I be eligible for tax exemption on only 50% of the home loan?
If you are a co-owner of the property and are repaying the entire loan then you will be eligible for 100% tax benefits under section 80C and section 24. These sections provide you with tax deductions of 1.5 lakhs on interest payments and 2 lakhs on principal repayments respectively.
3. Should all co-borrowers take insurance on home loan? Does it cover full loan burden?
Yes, it is best if all co-borrowers take insurance while taking home loan as in the case of any untoward incident the other co- borrowers will get burdened with paying their share of the EMI too. A loan cover will take care of their EMIs. You can take insurance while completing the documentation formalities of your loan before disbursement. There are different kinds of loan insurance covers. While some safeguard your family or other co-borrowers from paying the outstanding loan amount, others safeguard you against damages to property or burglary. Based on your preferences you can choose an insurance policy.
4. Can I and my wife become co-borrowers of a loan taken to construct a house on my father’s property? Will I be eligible for tax benefits on this loan?
Yes, you can take a loan for construction of property with your wife as a co-borrower. You can claim full tax benefits under section 80C and section 24 on your EMIs, stamp duty and processing fee.
5. Can I claim tax exemption for a property in my wife’s name, for which I am paying full EMI, since I am the deemed owner?
In this case, since the co- borrower is not a co-owner of property, he cannot claim any tax exemption. The only solution to this is if your wife executes a sale deed or gift deed in your favour to include you as a co- owner in the property. To do this, she will need to take approval from the bank. Since you are a co-borrower, the bank should hopeful have no objections.
6. Four of us plan to raise a loan from our friends and relatives to purchase a property. Will we be eligible for tax benefits from all sources?
Yes, all four borrowers will be eligible for tax benefit of up to 2 lakhs individually, under section 24 for interest payments. The principal repayments will not qualify for tax deduction as loans only from banks are eligible for such benefits. To claim this you will need to provide a certificate issued by the relatives. This will make them liable to pay tax on the income they receive from your interest payments.
7. In the case of under construction property, is it important that only co- applicants of home loan can register as co-owners of property?
Not at all! At the time of registration, one can add as many co-owners as they like, irrespective of whether or not they were co-applicants of the home loan.
8. If a property is owned by a mother who has no income and her son is salaried, can he is apply for loan?
The son can apply for a home loan only if he is a co- owner of property. The mother should preferably a co-borrower in the loan (although that is not compulsory).
9. I purchased a flat in August ’14 with my wife as a co-owner, its under construction. Can I claim tax benefits on EMI, stamp duty and registration this year?
Though you cannot claim tax deduction on EMI payments till possession of property, you can claim benefits on stamp duty and registration fee after registration of property.
10. My wife and I have a joint home loan. Can we claim 50:50 IT benefit on stamp duty and registration fees? What is the limit?
Yes, you can claim benefits on stamp duty and registration fees under section 80C up to a limit of 1.5 lakhs. Both can claim tax relief provided the payment receipts carry yours and your wife’s name.
11. Me and my my wife are co-applicant in an under construction property. Would it be possible that at the time of possession, we register the flat on her or my name only? Will it have any effect on our joint loan?
Yes, you can register the property under either of your names. The only drawback will be that either of the co-borrower who is not a co-owner of the property, will not be eligible for tax benefits on their home loan. Thus becoming co-owners is highly advisable.
12. I am the first applicant in a home loan and my father is a co-applicant. The repayment is through my father’s account but is it possible that I alone claim all the tax benefits? Both myself and my father are owner of the house.
In this case you will not be able to claim tax benefits as the Certificate of Interest will have only his name on it. To claim tax benefits you could direct EMI payments through your account or a joint account.
13. My wife and I have 50:50 ownership of property, but I repay 60% of the EMI while she pays remaining 40%. So can I claim 60% deduction on interest and 50% on principal payments?
No, you can either claim benefits in proportion of ownership, or in proportion of contribution to EMI. One can claim 100% benefits only if the other is not contributing to EMI.
14. I have 2 properties; for first one I am the sole owner, for second one my wife is co-owner. The first property is currently self occupied and I am availing tax benefits on the same. For second one, can my wife show it as self occupied and claim tax deduction on it?
As per the law, husband and wife are supposed to stay together unless the stay in different cities. So legally it will be invalid for her to declare the second property as self occupied. For both husband and wife, if house A is self occupied, then house B has to be shown as let out/ vacant property. You can claim tax deduction only on these basis.
15. My wife and I are co-borrowers of a loan. Since she is unemployed, she will not claim tax deduction. So should I submit a declaration by her on a stamp paper or plain sheet stating the same so that I can claim full benefits?
You can claim full tax benefits as bank’s interest certificate will list you re-payer. You can self declare that you will be claiming full benefits, your wife need not submit a declaration.
16. My father and I are co- applicants of a home loan. The bank’s interest certificate lists both of us as re-payers. How can we define our share in repayment, as the bank doesn’t give separate interest certificates? How can co-applicants claim tax benefit in such cases?
A copy of the ‘Certificate of Interest’ is sufficient for interest and principal declaration. You can self declare your shares in repayment. Even if one co-applicant wants to claim 100% deduction, self declaration will suffice.
17. I have paid a pre EMI of 12 lakhs for an under construction property. I got possession in December 2014. Can we claim this interest in 5 equal installments of 2.4 each for the next 5 years? Is this amount over and above the limit of 2L. under section 24? This financial year the interest component of our EMI is 4.5 L. My wife and I will be claiming 2L each, can we claim the the additional 2.4L deduction too?
Any interest paid on loan before possession of property can be claimed every financial year from 2014-15 to 2019-20. This will be included in the maximum limit of 2 lakhs for each co- borrower. So out of your interest payments of 6.5 lakhs in this financial year, you will be able to claim tax deduction on only 2 lakhs.
Here’s a peculiar situation on of our customers found himself in;
18. I have taken a joint home loan with my father but I am not property owner, my mother and father are. To increase the loan eligibility, I am the primary loan applicant. But as a non-owner of property, I will not be able to claim tax benefits. The bank says that EMIs will be deducted from my salary account. So in this case even my father will not be able to claim tax deduction as the year end statement will have my name on it. What can I do?
You are right. Since the bank statement will show that payments have been made through your account, your father will not be able to claim tax benefits. Hence I suggest that your father can open a savings bank account through which you can direct the EMI payments. There is no compulsion to make the payments through your salary account only, you can choose which account to pay from and direct the bank accordingly. Have more queries on joint home loans? Feel free to drop them in the comments section below. We will be happy to help you out 🙂
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