Claiming tax benefits on Joint Home Loans can significantly reduce your tax liability, especially when multiple borrowers are involved. In a Joint Home Loan, both co-owners are eligible to claim deductions under the relevant sections of the Income Tax Act, provided they meet certain conditions. To effectively claim these benefits, you need to understand the eligibility criteria.

When learning how to claim tax benefits on Joint Home Loans, you should know that each co-borrower, also the co-owner of the property, can claim deductions on the interest and principal payments towards the Loan, reducing the overall tax liability. Under Sections 80C and 24(b), each borrower can claim a share of the deductions based on their repayment contributions. Thus, Joint Home Loans are attractive for maximising tax savings.

Types of tax benefits

• Self-occupied property

Joint Home Loan borrowers claim tax benefits for a self-occupied property on both principal repayment and interest paid. Under Section 80C, each co-borrower and co-owner can claim deductions of up to Rs. 1.5 lakh annually on the principal repayment. This benefit is available if the property is not sold within five years from the end of the financial year in which possession is taken.

Under Section 24(b), each borrower can claim up to Rs. 2 lakh on the Loan interest paid every year. Thus, if both co-borrowers jointly contribute towards repayment, they can claim a maximum of Rs. 3.5 lakh deduction per year.

• Rented property

Under Section 24(b), there is no upper limit on the interest deduction for a rented-out property. Borrowers can claim the entire interest paid as a deduction, but the maximum loss from house property against other income is capped at Rs. 2 lakh per year. The remaining loss is carried forward for up to eight financial years and adjusted against future rental income.

Under Section 80C, the deduction of Rs. 1.5 lakh on principal repayment remains the same as for a self-occupied property. Section 80C and 24(b) deductions are only available under the Old Tax Regime.

Conditions for claiming tax benefits

Before learning how to claim tax benefits on Joint Home Loans, both individuals must be co-owners of the property, which entitles them to claim principal and interest repayment deductions. If one person is not an owner, they will not be eligible for tax benefits, even if they are a co-borrower on the Loan. Tax benefits only apply if both individuals are co-borrowers on the Home Loan. It ensures that both parties are legally responsible for repaying the Loan.

The construction of the property should be complete, or the property should be ready for possession. If the property is still under construction, the principal and interest tax deductions might be limited or delayed until the property is ready for occupation.

Conclusion

Joint Home Loans provide an effective way to maximise tax benefits while sharing the financial responsibilities of homeownership. By combining incomes, co-applicants can increase their Loan eligibility and claim individual tax deductions on principal and interest payments.