While many house purchasers choose a joint home loan to increase their eligibility, the loan repayment and tax advantages on such loans must be done in a certain ratio. Tax regulations allow you to take advantage of various advantages when it comes to house loans. Subject to certain circumstances, the benefits are available under Section 24(b) for interest paid and Section 80C for principal repayment. Couples frequently choose a joint house loan since it improves their co-applicant in home loan eligibility. However, when it comes to shared house loans, there is a lot of uncertainty regarding who may claim the home loan benefit and how much of a tax advantage can be claimed.
Joint Home Loan Tax Benefit
The EMI amount payable will have two components, namely interest, and the principal. In case you have a self-occupied property, then the amount paid for principal will get you deduction under Section 80C. If you already have another home that is not occupied by anyone or your parents/family members live there, then it will be taken in the self-occupied category also.
How to Claim Tax Benefits For Joint Owners?
As a co-applicant, you can include your spouse if they are likewise employed. A 30-year loan is available to the borrower. Several banks offer women applicants concessions. In addition to stamp duty exemptions, there are also interest rate reductions and tax savings on both the principal and the interest. A house loan’s maximum tax advantage might be up to 7lakh per year, including principal payments and interest. Joint home loans are available only to spouses who are joint owners of the property.
Joint Home Loan with Non-Working Wife
There are no benefits to taking out a combined house loan with your non-working spouse if you are short on cash and desire to take advantage of a greater credit limit, as there would be no additional revenue streams. Having the non-working spouse as a co-applicant for cheaper stamp duty and lower housing loan interest rates might still be beneficial, however, since many banks provide house loans at lower rates for women.
Co-Borrowers vs. Co-Owners
Your part of the jointly owned property is taxed according to Section 26 of the Income Tax Act. Taxes are levied on each individual’s portion of a residence that is owned under joint ownership. A BOI or Association of Persons cannot be taxed if your part in the common property is definite or ascertainable (AOP).
To be eligible for tax benefits, you must be both a co-borrower home loan and a joint owner of the property. If you do not meet this fundamental requirement, you will not receive the tax advantages associated with your home mortgage. An individual may join another close family member (father, son, or spouse) to qualify for a larger loan amount without owning any equity in the property being acquired. If the co-borrower is not a joint owner of the property, they cannot claim tax advantages on the house loan in such situations. If you acquire the property under a joint name, you can claim the tax advantages individually.
Claiming Ratio of Tax Exemptions
You may also be a joint owner and a co-borrower, but you are not responsible for servicing the debt. Tax advantages are only available for sums paid by you; therefore, you can’t claim them on the house loan in this scenario.
You may receive interest benefits up to Rs 2lakhs per joint owner with one self-occupied property. Each co-borrower can claim up to Rs 1.50lakhs in tax advantages per year for house loan repayments under Section 80C, along with other qualifying goods. Your mortgage will be tax-deductible in proportion to how much you are paying back.
Determining Your Share in a Home Loan
As soon as you acquire the property, your ownership stake is set in stone. It might be in the form of a donation to the down payment or your portion of the mortgage. A co-borrower in the house loan application may also be a joint owner of a property, even if you have paid for your portion of the property in full with the down payment.
When purchasing a home, your part of ownership may not be included in the contract. Your portion of the mortgage may not be specified in the co-borrower in the home loan letter or the lender’s combined Home Loan Certificate. Unless other factors indicate otherwise, the shares in the house can be assumed to be equal.
Each joint owner’s payment history can be used to determine their portion of the house loan. Preparing an unstamped Memorandum of Understanding to identify the various interests of each joint owner in the property is always recommended to avoid future problems. Payment information for each joint owner might be included in a memorandum of understanding.
Home Loan Co-Applicant Declaration Form for Income Tax
Both parties will have to produce comprehensive paperwork stating the same to receive the tax benefits. To take advantage of the joint home loan tax benefit, you’ll need to get this paperwork from your bank’s branch.
Ensure all joint owners are not claiming identical interest or principal payments as tax advantages. Others in the group must sign a No-Objection Certificate (NOC) stating that they will not be claiming any tax advantages on that amount. In addition, they would have to specify the percentage of interest and principal payments that the taxpayer can deduct.
Tips for Home Loan Co-Applicants
In the best interest of all parties involved, the contribution of each party to the transaction should be clearly defined. This eliminates the possibility of future conflicts. As for the share-based partition of the property between two parties, there will be no disagreement.
If the EMI advantages are paid by one party, it should be explicitly stated in the house loan contract. It should also explain how much of a co-money borrower is being used.
Banks offer joint house loans to persons who have a certain type of relationship with each other. Check with the bank first to see whether it will grant you a combined house loan, say with your sister.
Can both Husband and Wife Claim Home Loan Interest
The benefits of home loan interest and principal repayment tax benefits may only be claimed by joint owners like a joint home loan with homemakers and co-borrowers. Jointly held property is taxed individually for each owner under Section 26 of the Income Tax Act. Because the property is jointly held by you (the husband) and your wife, both of you are eligible to claim the interest benefit under Section 24 as well as the principal repayment of the house loan under Section 80C, provided that both of you are paying back the home loan in full.
Joint Home Loan Tax Benefit Declaration PDF
It’s important to note, though, that you must be a co-owner of the property to qualify for the tax savings that come with the joint ownership declaration form. Only then will you be able to deduct the principal repayment and interest payments from your taxes.
How to Maximize Tax Benefits On a Joint Home Loan?
Certain advantages are available under the Income Tax Act of 1961 with relation to house loans. Section 24(b) provides home loan co-owner tax benefits for interest payments, whereas Section 80C provides tax benefits for principal repayment, subject to specific requirements. Choosing a combined house loan, tax and investment experts say, will increase a couple’s home loan eligibility.
However, when it comes to home loan co-applicant declaration, there is a great deal of misunderstanding regarding who may claim the home loan benefit and how much of a tax advantage they can get. Experts say that you are taxed on your portion of the property as an individual in the event of joint ownership of a house. Your part of the jointly owned property is taxed according to Section 26 of the Income Tax Act.
Tax Benefits on Joint Home Loan
The maximum interest deduction for a self-occupied property is Rs 2,000,000 per co-owner who is also a co-applicant. As a result, each owner receives a portion of the total interest paid on the loan. It should go without saying that the total interest claimed by the owners/borrowers cannot exceed the total interest paid on the loan.
As of the 2017 budget, the amount of interest claimed as a deduction for rental property is limited to Rs 2lakh.
Section 80C allows each co-owner to deduct a maximum of Rs 1 50 000 towards the repayment of principal. Section 80C has a total maximum of Rs 1 50 000.
Things to Know If you are going for Joint Home Loan
Those who cannot afford a large house loan might consider a combined loan. Banks and lenders won’t care if a borrower divides the loan amount with a family member or a known individual. With a combined home loan, your chances of getting a larger loan with lower interest rates increase.
However, a shared house loan may only be obtained if both partners’ credit ratings are high enough. Approval of a combined house loan is subject to both parties’ income.
As part of the requirements for a combined mortgage, both borrowers must have an income that will allow them to pay the monthly EMIs.
Joint house loans are eligible for Section 80C benefits, which both borrowers can claim. Amounts up to Rs 2lakh can be deducted by both borrowers. In addition, borrowers can deduct up to Rs 1.5lakh from their taxable revenues.
Joint Home Loan: Pros and Cons of Adding a Co-Applicant to Your Home Loan
Adding a co-applicant to your loan application will enhance your loan eligibility. Be sure to evaluate the advantages and downsides of a combined home loan before you decide.
Pros
To be eligible for a larger loan amount and to bear the financial load evenly, a combined house loan is obtained with a home loan co-applicant is mandatory. Two or more persons apply for the loan under their joint names, with one as the principal applicant and others as subsidiary applicants.
As banks assess eligible loan amounts as a percentage of income, joint loans improve loan eligibility. It is computed as a multiplier for all of the previous loans taken out.
Cons
It is important to keep in mind that being a co-applicant is more than just a formality. Legal and financial duties are also imposed on both parties, which they must fully comprehend.
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Frequently Asked Questions (FAQ’s)
Who gets the tax benefit in joint home loans?
A co-borrower home loan declaration is required. The property’s owner may only claim tax advantages for a co-owner home loan. As per the property paperwork, the borrower may not be listed as an owner. As a result, you may not be eligible for tax advantages.
How do I claim tax benefit on a joint home loan?
Section 80C allows each co-borrower to claim tax advantages for house loan repayment.
How can both husband and wife claim home loan interest?
Each co-owner, who is also a co-applicant in the loan, can claim a maximum deduction of Rs 2 00 000 for interest on the home loan in their Income Tax Return for the jointly owned property. The total interest paid on a loan is allocated to the owners in the ratio of their ownership.
Can the husband claim tax benefit on wife property?
The husband’s property purchased in the wife’s name can be claimed by the husband if the monies used to purchase it are legitimate and from recognized sources.
