Taking a home loan is a long-term commitment for the borrower. More often than not, the loan amount is high. So, to offer some respite to borrowers, there are certain tax laws put in place. Home loans generally span out over 20-30 years and since this is a very long tenure, it is recommended that applicants apply for a joint home loan.
The chances of approval also increase when you apply for a joint home loan. You can apply for such loans along with a close or immediate family member like your spouse, a parent or even sibling, whoever is employed and qualifies for tax exemptions.
Here are 3 ways you can claim tax benefits on a joint home loan:
Co-Owner Of The Property Purchased
To avail of any home loan tax benefits under the Income Tax Act, you need to be the co-owner of the property you will be purchasing with the loan amount. The house should also be a self-occupied property. Joint home loans allow all members listed as co-owners to become eligible for tax deductions. You can then claim a maximum amount of INR 1,50,000 on the principal component. The interest component is allocated between joint owners based on the share they have in the ownership. If you are going to claim deductions against stamp duty and registration charges under Section 80C of the Income Tax Act, it has to be filed within the same financial year.
Co-Borrower Of Home Loan
To opt for a joint loan, there has to be a minimum of 2 people registered as co-borrowers. This is apart from being registered as a co-owner for the property to be bought. If you are listed as just a co-owner and not a co-borrower, you will not be eligible for any tax benefits. This rule was put in place because a co-owner may or may not contribute to the loan repayment. On the other hand, a co-borrower is responsible for repaying the EMIs during the loan tenure.
Construction Should Be Completed
To claim tax benefits on a joint home loan, the property purchased should be completely constructed. You can start filing for tax benefits from the financial year in which the construction of the property was completed. You may be able to claim the interest you paid during the construction period in 5 equal instalments. These instalments can begin with the fiscal year in which the construction is complete and the property is ready to move-in.
Your home loan application will be more likely to get approved if you apply for it jointly with a family member. This is because the repayment responsibility is shared and this instils trust in lenders. If you list a maximum of 6 people as co-owners and borrowers of the loan, you can also reduce your tax outgo in large amounts. However, not all combinations are approved by lenders so you will need to confirm what combinations are approved by the lender of your choice before you apply for a home loan.