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Financial Planning while taking a Home Loan makes us feel choked. This is a very fundamental and essential decision in our lives, where we are financially eligible to get a house of our own. In this sort of situations, the Home Loans come as a rescue.
In this article, we will be talking about the tax benefits for the Joint Owners on the home loan. The tax benefits on a joint home loan can be availed by all the Joint Owners. But to avail that, there are certain conditions to be met.
The tax benefits on a joint home loan can be availed by all the Joint Owners. If you have already taken the loan jointly, you won’t be able to enjoy the tax benefits unless you are the owner of the property.
In many cases, you can see that, there is property which is owned by a parent and the parent and the child take up the loan together which is paid off by the child only. In such cases, where the child is not a co-owner is devoid of all the tax benefits on the home loan.
Therefore, to claim the tax benefits on the property they are certain conditions.
Conditions That Necessary To Claim The Tax Benefits
You must be a Co-owner in the Property
To claim tax benefits on your home loan, it is very necessary to own that property. In fact, you should be an owner of the property. In cases, where the loan is taken jointly but the borrower is not an owner according to the property documents. In such cases, you will not be able to claim tax benefits.
You must be the Co-borrower for the Loan
Besides being an owner, you must also be an applicant according to the Loan Documents. The owners who are not borrowers and do not contribute to EMI will also be devoid of the tax benefits.
The Construction of the Property must be Complete
The tax benefits on a house property can be claimed to start the financial year in which the construction of the property is complete. The tax benefits are not complete for an under-construction property. However, any expenses prior to the completion are claimed in five equal installments starting from the year, in which the construction is complete.
If the above conditions are met, then the following tax benefits can be claimed:
For a self-occupied Property
Each Co-owner who is a partner or co-applicant in the loan can claim a minimum deduction of Rs 2, 00, 000 for the interest on the Home loan in their Income Tax Return. The total interest that is paid on the loan is allocated to the owners in the ratio of their ownership.
Each owner/borrower can claim an interest benefit up to a maximum of Rs 2, 00, 000. The total interest claimed by the owners/borrowers should not exceed the total interest paid on the loan.
For a better understanding, let us take a Layman example saying Raj and his father purchased a house on loan and paid Rs 4, 50, 000 as interest. They share a 50:50 of the property. Therefore, in this case, Raj can claim Rs 2, 00, 000 on his tax return and his father can also claim Rs 2, 00, 000.
For a Rented Property
According to the budget 2017, the interest that can be claimed as a deduction in case of a rented property is restricted to the amount to which the loss from such house property does not exceed more than 2 lakhs.
Each co-owner can claim for a deduction of the maximum of Rs 1, 50, 000 towards the repayment of the principal under the Section 80C.
Therefore, as a family you can take a larger tax benefit against the interest paid on the home loan which is owned jointly and the interest outgo is more than Rs 2, 00, 000 per annum.
There are cases, where you are paying the entire loan installment but your co-borrower is not contributing any payments. In such cases, you can claim the whole interest as a deduction on your Income Tax Return.
The stamp duty and the registration charges on a property can also be claimed by the Joint Owners.