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Tax Saving Tips When Clubbing Income for A Joint Home Loan

Adhil Shetty

A housing loan comes with twin benefits where you can avail a tax benefit on principal repayment under Section 80C and interest payment deductions under Section 24 of I-T Act. In a joint loan, both the borrowers can individually avail tax benefits.

Tax Saving Tips When Clubbing Income for A Joint Home Loan

For many aspiring homebuyers, the current low-interest rate scenario could be an ideal time to avail a Home Loan. But, many who approach the bank have to go through the tough eligibility criteria to get the desired loan amount.

You might be earning a good income, but the bank may ask for a higher income before sanctioning a Home Loan. In such cases, the best option you have is to club your income with that of your spouse, parents or siblings to get the Home Loan, also called a Joint Home Loan.

Tax Saving Tips When Clubbing Income For A Home Loan 

You can take a joint Home Loan with your spouse, parents or siblings. However, some terms and conditions apply if you consider taking a joint loan with sister and immediate relatives.

  1. Understand These Terms And Save Tax When Clubbing Income For A Home Loan 

Co-owner Of A Property

To put it simply, you must be a co-owner of the property or one who has a legal right to the property to get the Tax Benefit.

Co-borrower Of A Property

A co-borrower shares the responsibility of repaying the Home Loan along with the main borrower. If you are an owner of the property but do not pay the Home Loan EMI’s, you can’t avail tax benefits on the loan.

Co-applicant Of A Property

A co-applicant of a property applies for a Home Loan along with the main borrower. All co-owners of a property must be co-applicants, but all co-applicants need not be co-owners.

  1. Save Tax On Principal Repayments Of Joint Home Loans

Home loan EMI’s are divided into 2 components: Principal and Interest.

Let’s say you club the income with your spouse and apply for a joint Home Loan. You are eligible for tax benefits under Section 80C. You get a tax deduction under Section 80C of the Income Tax Act up to Rs. 1.5 lakhs a year on the EMI (Principal) you repay for the Home Loan within overall limits.

The good news is that your spouse gets a separate deduction up to Rs. 1.5 lakhs a year under Section 80C on her/his Home Loan principal repayment too.

  1. Save Tax On Interest Repayments Of Joint Home Loans

If you are a co-owner and a co-applicant in a joint Home Loan, you get maximum tax deduction under Section 24 which is up to Rs. 2 lakhs a year on the EMI (Interest) of the Home Loan.

Your spouse can separately claim this tax benefit on interest repayments which is again up to Rs. 2 lakhs in a year. You and spouse/brother can get this tax benefit based on the ratio of ownership.

Let’s understand this concept with a simple example:

Naresh and Geeta are husband and wife. They both have a 50:50 share/ownership in a property and had availed a joint Home Loan to buy this property. They have to pay an EMI (interest) of Rs. 5 lakhs on the Home Loan for the financial year 2016-17.

If Naresh or Geeta had taken a Home Loan in their individual capacities, they could have availed a maximum of Rs. 2 lakhs in a year on interest repayment. Now, they can avail a maximum of Rs. 4 lakhs in a year on interest repayment through the joint Home Loan.

Naresh and Geeta can also get a maximum tax deduction up to Rs. 3 lakhs a year under Section 80C on their loan’s principal repayments if they avail a joint loan. They would have got just Rs. 1.5 lakhs in a year if they had availed a Home Loan individually.

  1. Tax Saving On Interest Repayments For First Time Home Buyers On Joint Home Loans

If you avail a joint Home Loan to buy your first home, you get a tax deduction on interest repayments up to a maximum of Rs. 50,000 in a financial year under Section 80EE, subject to certain conditions. This is over and above the Rs. 2 lakhs a year you get for interest repayments under Section 24.

With a Home Loan, banks have given you an excellent opportunity to buy a house in your youth. Clubbing your income with that of your spouse/parents/brother will help you save tax to a great extent.

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