Maximise Tax Benefits as a Co-borrower on a Home Loan

Owning a home is a shared dream for many families. To make this dream a reality, people often apply for a home loan. But did you know that if you share the responsibility of a home loan as a co-borrower, you can also share the tax benefits? Let us explore how co-borrowers can claim tax benefits on home loan interest and principal repayments.

Who can be a co-borrower?

A co-borrower is someone who shares the responsibility of repaying a home loan. Typically, close family members like spouses, siblings, or parents can become co-borrowers. However, being a co-borrower is not the same as being a co-owner. To claim tax benefits, you must be both.

Can co-borrowers claim home loan interest?

Yes, co-borrowers can claim home loan interest under Section 24(b) of the Income Tax Act. The total interest paid on the home loan can be split among all co-borrowers, provided:

• The property is jointly owned: Only co-owners of the property are eligible for tax benefits.
• The loan is jointly borrowed: You must be a co-borrower listed in the loan agreement.
• Repayment is shared: Each co-borrower must contribute to loan repayment.

When these conditions are met, each co-borrower can claim up to Rs. 2,00,000 on the interest paid if the property is self-occupied.

Tax benefits for principal repayment

Under Section 80C of the Income Tax Act, you can claim deductions for principal repayment. The maximum deduction is Rs. 1,50,000 per individual. Like interest benefits, principal repayment tax benefits can also be shared among co-borrowers based on their contribution.

Benefits of claiming as a co-borrower

• Maximised tax savings: By sharing the loan, each co-borrower can individually claim tax benefits on both interest and principal repayment. For example, a couple can collectively save up to Rs. 7,00,000 in taxes annually if they both maximise their deductions under Sections 24(b) and 80C.
• Shared financial responsibility: When two or more people share the repayment, it reduces the financial burden on an individual. This makes home ownership more affordable.
• Enhanced loan eligibility: A joint application with a co-borrower often improves your loan eligibility. This is particularly helpful if the co-borrower has a stable income or a good credit score.

Important points to remember

• Proof of ownership and payment: Tax authorities may require proof of joint ownership and repayment contributions. Keep property documents and bank statements handy.
• Tax deduction limits: The tax benefits are subject to individual limits, even if the loan is shared. Co-borrowers cannot claim more than the specified limits.
• Under-construction property: If the property is under construction, the interest paid during the construction phase can be claimed in five equal installments starting from the year of possession.
• Rental properties: For rented properties, there is no upper limit on the deduction for interest paid. However, the rental income will be taxable.

Steps to claim tax benefits as a co-borrower

• Check eligibility: Ensure you meet the co-ownership and co-borrowing criteria.
• Calculate your share: Split the repayment proportionately.
• File Income Tax Returns: Use the relevant sections of the Income Tax Act to claim deductions.

Why choose Bajaj Housing Finance for Home Loan?

Owning a home is rewarding, and with the right financial planning, it can also be tax-efficient. Claiming home loan interest tax benefits as a co-borrower not only lightens the financial load but also brings added savings.

If you are considering a home loan, Bajaj Housing Finance Home Loan can help. With competitive interest rates, flexible repayment options, and quick approvals, Bajaj Housing Finance makes it easier to buy your next home and save on taxes in the process.

Here are some benefits of opting for a home loan with us:

1. High loan amount: Secure funding up to Rs. 15 crore* to turn your dream home into reality.

2. Low interest rates: Enjoy interest rates starting 8.25%* p.a, and EMIs as low as Rs. 741/lakh*.

3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.

4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.

5. Simple application: Take advantage of doorstep document collection for a smooth process.

6. Balance transfer facility: Move your existing home loan and get a top-up loan with better terms.

Why wait? Start planning your shared homeownership journey today!