Joint Home Loan Tax Benefit: Everything You Must Know

The home loan application has surmounted by almost 76% in the 4^th quarter of FY2021 than the same quarter in FY 2020 (1). The major reasons for this insurmountable rise are its lucrative interest rate, easy application process and tax benefits. The Indian Government has enabled its citizens to reduce their taxable income under Section 80C, 24 (B) and 80EEE if they obtain a home loan. In fact, in a joint home loan, both the co-borrowers can opt for this tax redemption. Here is everything that individuals must be aware of about this joint home loan tax benefit.

First, let us consider some of the fundamental aspects of home loan tax redemption to ensure that all your claims are valid.

Things to consider before applying for home loan tax benefits

Here are some of the facts individuals must consider while claiming tax benefits:

• Borrowers get tax deductions only on the interest component paid in a financial year through all the EMIs. Let’s assume that a person has paid 12 EMIs of Rs.12,000 each and the total interest outgo for all these instalments amounts to Rs.50,000. In this circumstance, he/she can reduce Rs.50,000 from their gross annual income.
• Applicants must not get confused about getting flat tax deductions of the interest amount. For example, in the scenario mentioned above, he/she will not get a reduction of Rs.50,000 from their payable tax amount.

Income Tax Act Sections allowing joint home loan tax benefit 

Following are all the sections of Income Tax (IT) of India that empowers co-borrowers of a joint home loan to obtain tax benefits:

Section 80CC of Income Tax Act of India

Each co-applicants of a joint home loan can leverage tax redemption for up to Rs.1.5 lakh from the Section 80CC of the IT Act of India, 1961. However, the co-borrowers must fully occupy the house constructed with the credit advance availed through a home loan to be eligible for the tax benefit.

Section 24 (B) of Income Tax Act of India

Section 24 (B) of the Income Tax Act of India facilitates individuals to get a tax redemption not only on the paid interest component but also on the settled principal amount. To be eligible for joint home loan tax benefits under this IT Act, they need to get their house constructed within 5 years of loan disbursal.

Section 80EEE of Income Tax Act of India

The Indian Government has provided a special advantage for first time home loan borrowers by giving Rs.50,000 of taxation benefit. Both the joint home loan applicants can leverage this IT Act by satisfying some of its conditions as mentioned below:

• The expenditure on construction must be within Rs.50 lakh.
• The loan amount must not exceed the limit of Rs.35 lakh.

Apart from this, individuals must also be careful about the conditions co-borrowers must meet for getting the joint home loan tax benefit.

Conditions to apply for tax benefits in a joint loan 

Co-applicants of a joint home loan must fulfil the below-mentioned circumstances to be eligible for the tax deductions:

• All co-borrowers must be co-owners of the house purchased or constructed through the home loan amount.
• The construction of the house must be completed before the taxation.

Apart from these higher tax benefits of a joint home loan, individuals must be aware of all other advantages they can obtain by taking this credit advance with a co-borrower.

Benefits of a joint home loan

Following are the benefits individuals may obtain through a home loan taken jointly:

• Prospect of a higher loan amount

Individuals can obtain a larger home loan amount by applying for it with co-borrowers. This is because lending institutions get an assurance that there is a low risk of loan default owing to the involvement of more than one person. 

• Special interest rate

Female lenders get special privileges such as lower home loan interest rates. So, borrowers can get the loan sanctioned at a lucrative interest rate if one co-borrower is a woman. This way, they can curtail their overall borrowing cost to a large extent. 

• Loan approval with a low credit score

Individuals with a lower credit rating than the standard CIBIL score of 750 can also meet their financial requirements through a joint home loan. However, in this circumstance, they should ensure that the co-borrower has a healthy credit accreditation according to this market standard.

This way, individuals can reap maximum benefits by availing of a joint home loan. 

Nevertheless, individuals should consider availing of the pre-approved offers for getting additional benefits that their lender extends on financial products such as home loans and loans against property. This significantly quickens the application process so that you get the credit in no time. To check their pre-approved offers, individuals need to mention their credentials, such as names and contact information. 

In conclusion, both the co-borrowers can be eligible for joint home loan tax benefit under the IT Act of India. The Indian Government helps its residents reduce their tax liabilities for a financial year through these regulations to give them a monetary respite.