A joint home loan availed by two or more close family members, such as spouse, siblings, parents or children, enhances loan affordability.

It not only divides the repayment responsibility but can also help lower interest rates and improve eligibility for a higher loan amount by combining the income of both borrowers.

Many lenders also offer concessional interest rates on home loans to women co-borrowers, provided they are the co-owner of the property.

The greatest advantage of availing a joint home loan in a double-income household is each borrower can not only save big on taxes but also enjoy increased tax benefits.

How to tax benefits

Usually, a home loan borrower can claim tax benefits up to ₹1.5 lakh on the principal amount under section 80C and up to ₹2 lakh on the interest paid under section 24b of the IT Act.

Double tax benefits on principal

Under Section 80C of the Income Tax Act, each borrower who is also a joint owner of the property can claim tax benefits of up to ₹1.5 lakh per financial year, individually.

Together, the family can save up to ₹3 lakh per year on the principal repayment, which can increase in case of three joint borrowers and owners.

Dual deductions on interest

Under Section 24b, both the borrower and the co-borrower can avail tax benefits of up to ₹2 lakh each on the interest paid for a self-occupied property. Thus, joint owners can save up to ₹4 lakh per year on interest deductions.

All Borrowers co-owners

Each borrower should be a co-owner of the property to claim tax benefits. Someone who is paying the EMI but not a joint owner of the property cannot claim tax benefits.

Moreover, the percentage of deduction should be in line with the percentage of EMI contribution and not the share in the property.

It is also noteworthy that these deductions can be claimed only if the borrowers have opted for the Old Tax Regime while filing the Income Tax Return. By default, ITR filing is processed under the New Tax Regime, and if all co-borrowers aim to benefit from the home loan deductions, they have to file ITR as per the Old Regime.

More savings for woman

Women co-borrowers are usually charged a lower stamp duty, which in turn reduces the overall tax and the cost of acquisition. Some lenders also offer concessional rates to women co-borrowers. When combined with individual tax claims of Section 80C and 24b, it increases the family’s tax efficiency. Note that the woman co-borrower should be the co-owner of the property to enjoy tax benefits.

Beneficial for rented properties

There is no upper limit on the interest deduction for let-out properties. Thus, both the borrower and the co-borrower can claim huge tax deductions.

Increased Tax Efficiency

Joint home loans can help distribute deductions among the borrowers to prevent hitting individual deduction ceilings. This is beneficial when one of the borrowers earns more and enters a higher tax slab, thereby reducing the total tax outgo.

Joint home loans not only reduce the repayment burden but also help families reduce the tax outgo and save more.

(The writer is Head of Home Loans, Paisabazaar)