2 min read
25 May 2021

Buying a home in co-ownership has many benefits, but the biggest advantage of a joint home loan is that it offers higher tax benefits which mean more savings.

Here’s how you can avail of tax benefits on your joint home loan:

Tax saving under section 80C

Under section 80C of the Income Tax Act, each co-borrower can claim a tax deduction on the principal component of the EMI. The maximum deduction allowed is Rs. 1.5 lakh per annum. However, it is important to note that this exemption includes a contribution towards other investments such as life insurance premiums and Public Provident Fund (PPF). The income tax rules also stipulate that this deduction is available only for a fully constructed property. Further, this property has to be a self-occupied one. It is advised to check your eligibility to avail of this benefit.

Additional Read: When should you do home loan balance transfer

Tax benefits under section 24(b) of the Income Tax Act

A big advantage of a joint home loan is that under section 24, you can claim a tax deduction on the principal as well as the interest component of your EMI. If your property is self-occupied, you can get an exemption of up to Rs. 2 lakh per annum on the interest component. This is irrespective of whether you give the property out for rent or stay there yourself. However, in order to be eligible for this deduction, the construction of the house must end within five years of the loan commencement. Otherwise, the benefit reduces to Rs. 30,000 per annum.

Additional Read: Your guide to getting a better home loan interest rate

Tax benefits under section 80EEE

As a first-time borrower, you can avail of an additional tax benefit on a home loan of Rs. 50,000 on interest repayment under Section 80EEE of the IT Act. This deduction is available for both borrowers. However, conditions stipulate that the property value should be Rs. 50 lakh or less. In addition, the loan amount should not exceed Rs. 35 lakh.

Things to keep in mind

Joint home loans are beneficial to borrowers in many ways. However, a few important things to bear in mind before you apply for a joint home loan. The co-applicant for the joint home should have a regular income. This is because the EMI must be split. But since the income of both parties might not be equal, it is best to divide ownership of the property based on the income levels of each person. It is also necessary for the co-borrowers to have separate life insurance policies. In case of the demise of any one party, this helps to reduce the burden on the other party.

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