Know the Tax Benefits of a Joint Home Loan

Having your own house is a dream for many. A home is a “once-in-a-lifetime” investment that gives you. Buying a house is no cakewalk (primarily due to fluctuating market prices). With so much competition between buyers, financing a home can be difficult. Many turn to loans to help them finance a new property.

A housing loan is a viable option. However, sometimes even qualifying for housing loans can be difficult. In this case, you can apply with a partner for a joint home loan. Do you want to apply for a joint home loan but are confused? 

You will find the correct answer to this question in this article. This article discusses all you need to know about joint home loans, their benefits, and all the tax exemptions available to applicants.

What is a joint home loan, and what is its significance?

A joint home loan is a form of financial assistance you take from a lender with a co-borrower to build or buy your own house. The co-applicant can be an immediate family member or your spouse. If you don’t qualify for a home loan, you partner with another person, and both can repay the loan.

You and your co-borrower share the responsibility of repaying the loan at a specific interest rate. The lender gives both of you a stipulated time limit within which you have to repay the debt in instalments.

What are the benefits of applying for a joint home loan?

There are several benefits to choosing a joint home loan. These benefits are as follows:

A larger loan can be sanctioned.

Lenders allow a larger loan amount as two borrowers bear the repayment responsibility. The loan amount can go as high as Rs. 10 crore or even more in some cases. However, this depends on your and your partner’s income, CIBIL score, creditworthiness, etc.

The risk is reduced.

As the housing loan is taken on a joint basis, the responsibility falls on the shoulders of both borrowers. So, the level of accountability is lower, and as a result, banks are less concerned.

The tenure of repayment is longer.

In India, most banks allow a tenure period of 30 years for joint home loans. If you have applied for a home loan alone, you will probably not get a longer tenure for repayment.

The approval process is faster.

The approval period varies from bank to bank, but most loans are approved within 3-5 days. Some also provide pre-approved joint home loans.

You get appealing interest rates.

In India, the interest rate for joint home loans starts at 8.25% per annum. Adding your spouse as a co-applicant will give you an additional discount on the interest rates.

What are some of the tax benefits of applying for a joint home loan?

If you and the co-applicant are contributing together to the repayment process, there are twin tax benefits that both of you will be enjoying.

• First, under Section 80(c) of the Income Tax Act, 1961, you and the co-borrower can claim a tax exemption of up to Rs. 1.5 lakhs per annum on the principal amount.
• Second, under Section 24(b) of the Income Tax Act, 1961, each co-borrower can claim a tax deduction on the interest of the loan, which is up to Rs 2 lakh. 

What are the conditions to claim tax benefits on a joint home loan?

Here are certain conditions that you need to fulfil to claim tax benefits for a joint home loan:

You should also be mentioned as the co-owner of that property.

You may not be able to claim the tax benefits if you do not have the property registered in your name. Since it is a joint home loan, you can only claim the tax benefits if you own that property.

You have to be a co-borrower on the joint home loan.

According to the loan documents, you must also be an applicant for the loan in addition to being a co-owner of the property. Otherwise, you cannot claim benefits under these sections.

Tax benefits can be claimed only if the construction of that property is complete.

You cannot claim any tax benefits if the property is incomplete or under construction. Under-construction properties are strictly prohibited from receiving any tax benefits.

What are the joint home loan tax benefits?

For two different categories, there are many benefits:

For the borrowers who own the property:

If you and the co-borrower co-own the property, each of you can claim a tax deduction of up to Rs. 2 lakh on the loan amount. The total interest paid by both is divided between the applicants in proportion to their stake in the property.

For the borrowers who rent a property:

If you and your co-borrower jointly claim the house, you can ask for larger tax advantages against the interest you pay on the joint house loan as a family, provided that the interest is more than Rs 2 lakh per year.

Conclusion

A joint home loan is a great way to get financial backup to build a house for your family. It can help you get a larger loan amount because the risk is divided. Furthermore, the tax benefit is often shared between you and your co-applicant. The tax benefits are divided according to the percentage of the property you hold. Ownership is the fundamental requirement to get any tax benefit, and the whole system is different if you have a rented property.

If you enjoyed reading these articles, you can visit Piramal Finance. We have several compelling articles on various topics, like personal loans, mutual funds, ETFs, SIPs, stock market investment, etc. Visit our official website now to learn more.