Housing Loan Tax Benefits for Joint Owners

Housing loans accounted for 9.47% of the total credit lent by financial institutions back in 2013-14, which grew to 13.13% in 2018-19 as per ET. The total home loans disbursed doubled from Rs. 5.39 Lakh Crore to Rs. 10.77 Lakh Crore between this period.

The primary factor constituting to this growth was the implementation of the Pradhan Mantri Awas Yojana (PMAY). Not only did this scheme made financing affordable but it also increased the tax benefits on joint home loan borrowers can avail.

Key stats at a glance –

  • The market size in USD – 180 billion.
  • Searchers in India for residential properties – 20 million.
  • of households vacant – 10.2 million.
  • Global ranking with the largest no. of households – India on 2nd position just after China.

Currently, borrowers can claim under income tax benefits under the following sections –

  1. Section 80C

Under Section 80C, borrowers can claim a maximum deduction of up to Rs. 1.5 Lakh on the home loan principal. Individuals must possess the property for at least 5 years to claim these benefits.

  1. Section 24(b)

Under Section 24 (b), customers can claim a maximum exemption of up to Rs. 2 Lakh on the home loan interest.

The construction or purchase of the property must be completed within 5 years of availing the loan. If not, then the benefits will reduce to Rs. 30,000.

Also, borrowers cannot avail joint home loan tax benefits for under-construction properties under Section 24(b). Borrowers can claim the benefits of the construction phase in 5 equal installments after the completion of the same.

  1. Section 80EEA

The 2019 Budget announced the insertion of Section 80EEA. Under this section, borrowers of affordable housing schemes can claim an additional deduction of up to Rs. 1.5 Lakh on the housing loan interest paid. This section is only valid on housing loans availed till 31st March 2020.

Borrowers must meet the following conditions to avail exemptions under this section –

  • Stamp duty of the house must not exceed Rs. 45 Lakh.
  • The maximum carpet area of houses is restricted to 60 sq. m in cities like Mumbai, Kolkata, National Capital Region (limited to Delhi, Noida, Greater Noida, Faridabad, Gurgaon, and Ghaziabad), Chennai, and Bengaluru.
  • The maximum carpet area of houses is restricted to 90 sq. m in other cities.

Additionally, the borrower must be a first-time homeowner and should not possess a house under his/her any other family member’s name.

Income tax benefits on joint home loans

Tax benefits on joint home loans are available as per the sections mentioned above. To avail the joint home loan tax benefit, the individuals have to be co-borrowers of the loan and co-owners of the property. Each individual can claim the maximum deduction, as mentioned in the sections.

For example, consider a joint home loan availed by two individuals jointly. Both of them will be able to claim the benefits of up to Rs. 1.5 Lakh under Section 80C on the home loan principal. Hence, the total decoctions availed is Rs. 3 Lakh.

Similarly, both of them will also be able to avail exemptions to the tune of Rs. 4 Lakh jointly under Section 24(b).

Note that the deductions will be split according to each person’s share in the home loan. The above example considers that both borrowers have a 50:50 share in it.

How to calculate income tax benefits on home loans?

Applicants can use a home loan tax benefit calculator to assess the exemptions they can avail.

Tax saving on home loans makes it one of the most lucrative finances to purchase or construct a property. Borrowers can also claim benefits of Section 24(b) when they avail an unsecured loan for home renovation. In such cases, the exemptions are limited to Rs. 30,000.

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