A Guide to Claiming Tax Benefits on Joint Home Loans
Jun 13, 2018 Legal Guidance
Buyers usually opt for joint home loans to improve their eligibility and repaying the loan easily. But claiming of tax benefits in such cases needs to be done in particular ratio. Such as according to the tax laws any individual can avail tax benefits under Section 24(b) for interest paid and under Section 80C for the principal repayment with respect to home loans. However, there is still a considerable amount of confusion in terms who can claim the tax benefits for the home loan and how much one can claim.
In order to avail the tax benefits, one needs to satisfy the basic condition such as an individual should be a co-borrower of the loan as well as the co-owner of the property that is the property should be in joint names. For instance, in many cases, people add names of their spouse, father or son just to enhance their home loan eligibility without having a share in the property purchase. In such case, the co-borrower is not eligible to claim the tax benefits.
Both the individual can claim the tax benefits with respect to their share in the property. However, it might happen that an individual is a joint owner as well as a co-borrower but he or she is not servicing the home loan. In that case, the individual cannot claim the tax benefit as the tax benefits can be claimed with respect to the amount paid by both the borrowers.
In case of each of the joint owners, for a self-owned property, an individual can claim the interest benefits up to Rs 2 lakhs. In terms of home loan repayment, each of the co-borrower can claim the tax benefits up to Rs 1.50 lakhs every year under Section 80C. The tax benefit on the home loan will be in the ratio in which each individual is servicing the loan.
The share of each of the joint owners can be ascertained from the payments made each of the owners. It is advised to prepare a Memorandum of Understanding (MoU) which should be stamped and clearly defines the shares of each of the owner of the property. The payment details made by each of the joint owners may also be mentioned in the MOU to avoid any hassle in the future.
However, it might happen that the share for each of the owners is fixed at the time of property purchase which might be based on the down payment contribution. It might also happen that your share in the property is not defined in the purchase agreement or you home loan share is not mentioned in the loan sanction letter issued by the lender. In such case, the share of the property is presumed to be equal.
Most people usually change the pattern of servicing the loan if one of the co-borrowers losses his or her job or due to some other reason. But that is wrong. One should change the pattern of servicing the home loan once it is fixed to avoid any issues with the tax authorities.
In order to avail the tax benefits, one needs to satisfy the basic condition such as an individual should be a co-borrower of the loan as well as the co-owner of the property that is the property should be in joint names. For instance, in many cases, people add names of their spouse, father or son just to enhance their home loan eligibility without having a share in the property purchase. In such case, the co-borrower is not eligible to claim the tax benefits.
Both the individual can claim the tax benefits with respect to their share in the property. However, it might happen that an individual is a joint owner as well as a co-borrower but he or she is not servicing the home loan. In that case, the individual cannot claim the tax benefit as the tax benefits can be claimed with respect to the amount paid by both the borrowers.
In case of each of the joint owners, for a self-owned property, an individual can claim the interest benefits up to Rs 2 lakhs. In terms of home loan repayment, each of the co-borrower can claim the tax benefits up to Rs 1.50 lakhs every year under Section 80C. The tax benefit on the home loan will be in the ratio in which each individual is servicing the loan.
The share of each of the joint owners can be ascertained from the payments made each of the owners. It is advised to prepare a Memorandum of Understanding (MoU) which should be stamped and clearly defines the shares of each of the owner of the property. The payment details made by each of the joint owners may also be mentioned in the MOU to avoid any hassle in the future.
However, it might happen that the share for each of the owners is fixed at the time of property purchase which might be based on the down payment contribution. It might also happen that your share in the property is not defined in the purchase agreement or you home loan share is not mentioned in the loan sanction letter issued by the lender. In such case, the share of the property is presumed to be equal.
Most people usually change the pattern of servicing the loan if one of the co-borrowers losses his or her job or due to some other reason. But that is wrong. One should change the pattern of servicing the home loan once it is fixed to avoid any issues with the tax authorities.
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