Tax benefits on joint home loan under section Sec 80C, Sec 24, Sec 80EEA

Households can save over Rs 7 lakh per annum from tax benefits awarded on joint home loans.

How to maximise tax benefits under a joint home loan

Applying for a home loan along with a co-applicant has become a common practice. Not only does it increase your chance of receiving a sanction for the house of your dreams, it also allows you to share the financial responsibility and gain additional tax benefits.

A host of tax breaks are available to all borrowers as long as they are also co-owners of the property. A co-borrower for a home loan can be anyone with whom you share a financial interest – your parents, siblings, spouse, or children. However, to be eligible for tax incentives, their name needs to be on both the ownership deed and the loan application. 

Related: Can having other loans affect your ability to buy a home?

How to maximise tax benefits for joint home owners?

The Income Tax Act awards relief to borrowers on both the repayment of the principal amount and interest component paid via monthly EMIs. This benefit is available to all the joint owners of a property. It is important to note here that the benefits can be claimed only if your name is registered on the property documents and basis the percentage of ownership claim. For example, between a couple if the wife's and husband's ownership is 60% and 40% respectively, then they can only claim benefits proportionate to their holding pattern and EMI spilt.

Here's how to maximise these tax benefits:

  • Section 80C: Borrowers can claim a deduction up to Rs 1.5 lakh in a financial year on repayment of principal. Payments made towards stamp duty charges and property registration can also be claimed under this section (one time only). This claim can be made within the overall limit of Rs 1.5 lakh of Section 80C. 
     
  • Section 24: Borrowers can claim up to Rs 2 lakh each towards interest paid on home loan in a financial year. The total interest claimed by the borrowers cannot exceed the actual interest paid. For under-construction properties, the deduction can only be claimed if the construction is completed within 5 years. If the time frame is exceeded, the borrowers can claim only up to Rs 30,000 per year.
     
  • Section 80EEA: Deductions under this section are available for affordable housing projects – those under Rs 45 lakh and size less than 645 sq ft (in metros) or 968 sq ft (other cities) and to first-time home buyers only. Borrowers can claim a deduction of Rs 1.5 lakh per year on interest payment over and above the Rs 2 lakh available under Section 24. It should be noted that benefits under Section 80EEA are available only for loans sanctioned between 1 April 2019 and 31 March 2022, and for those not claiming benefits under Section 80EE.

Related: Tax implication on jointly owned property

Last words

Optimising tax benefits under various sections of the IT Act can make buying a house a lot more affordable and significantly reduce a family’s tax burden. For instance, a home loan jointly availed of by a husband and wife can help bring down the household’s annual tax liability by up to Rs 7 lakh per annum (claim up to Rs 3.5 lakh each under Section 24 and Section 80EEA). They could also make additional claims under Section 80C to fully utilise the benefits available to home buyers.

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