Quite often it becomes a practical option to avail a joint home loan so as to increase the loan amount and get tax benefits too.
In case a couple plans to buy a home by taking a joint home loan then there are added advantages that they can avail from the loan. While a joint loan permits the total loan amount to be higher by combining the repaying power of the both the applicants, it also provides tax rebate on taxable income of both. Both the individuals can now claim tax rebate on the principal (Under Section 80C) and the interest (Under Section 24) that is repaid by them.
Here are some of the direct implications of a joint home loan:
- As per the Income Tax Act provisions, in case of joint loans, all the co-borrowers can avail tax benefits. The maximum stipulated limit of Rs 150,000 is applicable individually to both the borrowers (which imply that the total deduction possible will be limited to Rs 300,000).
- In order to avail the tax benefits through this provision the co-borrower of the loan also has to be the co-owner of the property.
- The share in tax exemption that each co-borrower gets is in proportion to the share in the home loan availed by the co-borrower.
- Where the husband and wife as co-borrowers are paying a total of Rs 240,000 as interest and Rs 100,000 as principal element of the home loan, each of them is entitled to a tax exemption of Rs 120,000 on the interest part subject to a maximum of Rs 150,000, and Rs 50,000 each for the principal element irrespective of their overall tax returns for the year.
- In cases where one co-owner is not earning then the earning partner has to enter into a legal agreement with the former to state that the entire burden of the home loan is being borne by the earning member. This will make the earning member to take full advantage of all tax exemptions available on the home loan. This agreement can be signed on Rs 100 stamp paper.
- Each borrower has to obtain the statement of payment made to the financier individually and submit the same separately in order to avail the tax exemptions.
As is evident from the above implications the tax benefits can be doubled by availing a joint home loan when buying house. There is no upper limit for tax exemption on the interest amount paid except that each co-borrower can claim rebate of up to Rs 150,000 only in any financial years. In certain cases where there are more number of co-borrowers such as other family members in a home loan the actual tax rebate availed towards payment of the interest element can be further increased.
There are certain restrictions on joint loan applications such as sisters, friends and unmarried couples cannot apply or benefit from this scheme. A maximum of 4 to 6 joint applicants are eligible for tax rebate under this clause.
Thus, availing a joint home loan is certainly a lucrative financial option to buy a house as well as save maximum possible on income taxes.
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