Gain Tax Benefits on Your Joint Home Loan
Buying a house is one of the major goals in your life. However, with the increase in loan options such as joint Home Loans, more people in the country are able to realise their dreams. This is because a person can pool in funds with their spouse or another family member to repay the EMI amount. It is even possible to afford a bigger house. But perhaps the biggest benefit of a joint Home Loan is that it offers higher tax benefits.
Here’s how you can take advantage of 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 contribution towards other investments such as life insurance premium and Public Provident Fund (PPF). The income tax rules also stipulate that this deduction is available only a fully constructed property. Further, this property has to be a self-occupied one. It is best to check your eligibility in order to avail this benefit.
- Tax Benefits under Section 24(b) of the Income Tax Act
A big advantage of a joint Home Loan is that you can claim 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 in the house 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.
- Tax Benefits under Section 80EEE
You must have heard of the phrases: “icing on the cake” and “cherry on the top” but what about “cherry on top of the icing on the cake”? While such a phrase does not exist, it is very relevant in this situation. As a first-time borrower, you can avail an additional tax benefit of Rs 50,000 on interest repayment under Section 80EEE of the IT Act. This deduction is available for both the 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. Make sure you meet these criteria in order to benefit from this deduction.
read this post: to understand Tax Benefit on Home Loan
Things to Keep in Mind
Joint Home Loans are beneficial to the borrowers in many ways. However, there are a few important things to bear in mind before you apply for the joint Home Loan. The co-applicant for the joint home should have a regular income. This is because you will want to split the EMI payments between yourselves. 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.
The Bottom Line
If you are planning to buy a house, make sure to review all your options. Whether you are married or not, a joint Home Loan can be a very good option. It helps the borrowers to share the burden of EMI payments. And the tax benefits are simply too good to ignore. If you are not convinced, simply take out your phone and calculate the total tax savings you will have over the entire loan tenure. Just imagine the additional money you can channel towards other investments.