Tax benefits on home loan taken as joint owners / joint borrowers

The tax benefits, on a joint home loan, are extended only to the “owners” / “co-owners”. It means that the registered property document needs to bear the names of each of the “owners” explicitly. It is a normal practice in India that a property is co-owned by a parent or a spouse through a loan taken jointly by the parent and child or spouses or siblings. However, you should be aware that      tax benefits accrue only to the “owner(s)” mentioned in the title deeds.

Here are a few pointers that you must keep in mind while availing tax benefits on the property.

• Be a co-owner in the property: The borrower of the loan should be an “owner” of the property for which the joint loan has been taken to claim tax benefits.
• Be a co-borrower in the joint loan: The government provides tax benefits in the form of tax deduction on the principal as well as interest paid on home loans. Hence, the “owner” must be a loan “applicant” or “co-applicant” as well. Owners who are not borrowers and do not pay EMIs don’t get tax benefits.
• Status of construction: Tax benefits are not available for an under-construction property. One can claim tax deductions from the financial year in which construction of the property is complete. But the expenses made prior to completion of the construction can be claimed in five equal instalments beginning from the year in which construction is complete.

Tax benefits on home loan

• For a self-occupied property: Each co-owner, who has a home loan under his name, can claim a maximum deduction of INR 2,00,000 for interest on the home loan in their Income Tax Return. The total interest paid on the loan is assigned as deduction to the owners in the ratio of their ownership.
• For a property out on rent: Each co-owner / borrower can claim the actually paid interest amount. There is no limit. One can claim any amount actually spent as interest, whether it is completed or not.
• For property under construction: INR 2 lakhs deduction applies only for a property that has been constructed within 5 years of taking the home loan. Moreover. the loan in such case should have been sanctioned after April 01, 1999. In case, the construction is not completed within this period, one is entitled only up to Rs 30,000 as deduction for such property.
• For second self-occupied property: As per the Finance Act, 2019, the second self-occupied home can also be claimed as a self-occupied one. However, prior to the amendment, the self-occupied second property was considered deemed to be let out.

Tax Benefits on Home Loan (FY21 onwards)

The following table illustrates the tax benefits available to a property owner who has a home loan