How to claim tax benefits on Joint Home Loan?

Saturday 1st June 2019
Author: Shreya Uppal

Highlights

Some of us think that taking a loan to buy residential property is not a good idea and so, they start saving some amount from their monthly income to convert it into a huge amount whenever needed. However, financial planners recommend that for acquiring a house for self-use, one should go for a housing loan and pay EMIâ€™s in place of going for recurring investment or SIP in other product.
There are many tax benefits which can be claimed on Home loan which further increases if it is Joint home loan.

Some of us think that taking a loan to buy residential property is not a good idea and so, they start saving some amount from their monthly income to convert it into a huge amount whenever needed. However, financial planners recommend that for acquiring a house for self-use, one should go for a housing loan and pay EMI’s in place of going for recurring investment or SIP in other product.
There are many tax benefits which can be claimed on Home loan which further increases if it is Joint home loan.
1. Interest paid on loan is eligible for a deduction up to Rs. 2 lakhs per annum from the income of an individual u/s 24 of the Income Tax Act, 1961 when the property is self-occupied or it one ownership property lying vacant.
2. Repayment of Principal amount of Loan up to Rs. 1.50 lakh is eligible for deduction under Sec 80C of the Income Tax Act, 1961.

Provision regarding Joint Home Loan
1. 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.
2. The tax benefits are applied according to the proportion of the loan taken by everyone involved in the joint loan. For e.g., if the ratio of ownership is 70%:30% then the loan amount of 50 L will be split as 35 L and 15 L respectively and interest/principal applicable to the respective amounts will be taken into account for each individual taking the loan.
3. If more than one person takes a home loan then the income of all the co-owners will be considered by the lenders. This can help increase the size of the loan. In this case, the bank combines the incomes of both the applicants, and thus, can sanction a proportionately higher loan amount. Buying a house jointly facilitates a larger loan as income of all the co-owners would be considered by the lenders.
4. In case a home loan is taken for buying the property, the ratio of each borrower in the home loan can be inferred from the share in the property and payments made. Your share in the home loan may not necessarily be in the same ratio as your ownership of the house property.
5. As the share in the home loan is crystallized at the time of purchase of the property, the home loan should be serviced in the ratio arrived at the time of the purchase. This share in the property cannot fluctuate year after year and remains fixed. Therefore, you cannot change the pattern of servicing your home loan, any time you wish to do so.
6. As most people are unaware about this, they resort to changes in the pattern of servicing the loan, when one of the co-borrowers loses his/her job or takes a long leave due to pregnancy or study leave. However, this is wrong. In order to avoid any issues with the tax authorities, one should not change the pattern of servicing the home loan, once is it fixed. In case of a cash crunch, other co-borrowers can temporarily lend/gift money, so that the ratio of servicing of the home loan is maintained throughout the tenure, according to the share in the home loan.