Co-Owners and Home Loans: How to Split Interest Deductions
- Rashmita Choudhary
- Oct 23, 2025
- 9 min read
Co-owning a property with a joint home loan offers dual financial advantages — shared ownership and shared tax benefits. Under Section 24(b) of the Income Tax Act, 1961, each co-owner can independently claim deductions for the interest paid on a housing loan, provided they contribute to both the property ownership and loan repayment. The deduction for self-occupied properties is capped at ₹2,00,000 per person per financial year, while no upper limit applies for let-out properties. This provision ensures that tax benefits are distributed fairly between co-owners based on their actual contribution.
Table of Contents
Understanding Joint Home Loan Tax Benefits under Section 24(b)
Joint home loans not only help co-borrowers share repayment responsibility but also provide significant tax advantages under the Income Tax Act. When two or more individuals jointly take a home loan and are co-owners of the property, each can claim tax deductions on both the principal and interest components separately. Section 24(b) allows each co-owner to claim up to ₹2 lakh per year on the interest paid for self-occupied property. In case of let-out property, there is no upper cap on the interest deduction, though the total loss from house property that can be set off against other income is limited to ₹2 lakh annually.
Eligibility Criteria for Claiming Interest Deductions
To claim tax benefits on a joint home loan, certain conditions must be fulfilled. The co-borrower must also be a co-owner of the property. The loan should be taken from a recognized financial institution or housing finance company, not from friends or relatives. The construction or purchase of the property should be completed, and possession must be obtained. Moreover, each co-owner can claim deductions only for the portion of the loan they have repaid, and this share must align with their ownership share in the property.
How to Split Interest Deductions Between Co-Owners
Interest deductions are split based on each co-owner’s contribution towards loan repayment. For example, if two co-borrowers equally share both ownership and EMI payments, each can claim a deduction of up to ₹2 lakh on the interest component under Section 24(b). However, if one contributes a higher proportion towards the loan, the deduction should be claimed proportionately. To substantiate the claim, proof of payment through bank statements or loan account summaries is essential.
Claiming Deductions for Self-Occupied Property
In the case of a self-occupied property, each co-owner can claim an interest deduction of up to ₹2 lakh under Section 24(b). The total benefit depends on the actual interest paid and the ownership share. The property should be used for self-residence by the co-owners and not rented out. Additionally, the construction of the property must be completed within five years from the end of the financial year in which the loan was taken; otherwise, the deduction is restricted to ₹30,000 per year.
Claiming Deductions for Let-Out Property
For let-out or rented properties, the interest deduction available under Section 24(b) of the Income Tax Act serves as a significant relief for property owners. Unlike self-occupied properties, there is no upper limit on the amount of interest that can be claimed as a deduction when the property is let out. This means that the entire interest paid on a home loan taken for such a property can be deducted from the rental income while calculating the taxable income under the head “Income from House Property.”
However, the Income Tax Act imposes a restriction on the amount of loss from house property that can be set off against other heads of income. Even though the actual interest payable may exceed ₹2 lakh in a year, only a maximum of ₹2 lakh can be adjusted against other income sources such as salary, business income, or income from other sources within the same financial year. The remaining unadjusted loss does not lapse but can be carried forward for up to eight assessment years. During these subsequent years, it can only be set off against future income earned under the same head, i.e., “Income from House Property.”
For instance, if an individual earns ₹6 lakh as annual rent and pays ₹9 lakh as home loan interest, the total loss from the property would be ₹3 lakh. Out of this, ₹2 lakh can be set off against other income in the current year, while the remaining ₹1 lakh can be carried forward to future years.
This provision also benefits joint property owners who have availed a joint home loan. In such cases, each co-owner can claim the deduction individually in proportion to their ownership share and loan repayment contribution. This ensures that both co-owners can maximize their tax savings while maintaining compliance with the tax laws.
Proper documentation, including the loan interest certificate, ownership proof, and rent receipts, should be maintained to validate the claim during filing or assessment. Utilizing digital tax-filing platforms can simplify the process by automatically calculating eligible deductions, ensuring accuracy, and avoiding missed benefits for rental property owners.
How Ownership Ratio and Loan Contribution Affect Tax Benefits
The share of ownership and contribution towards loan repayment play a crucial role in determining how much each co-owner can claim. If ownership is split equally but one co-borrower pays a higher share of EMIs, they can claim deductions proportional to their payment share. Proper documentation, such as the ownership details in the property registration document and payment proofs from respective bank accounts, helps avoid discrepancies during assessment.
Can Co-Owners Claim Principal Repayment under Section 80C?
Yes, co-owners can claim principal repayment under Section 80C of the Income Tax Act. Each co-owner can claim up to ₹1.5 lakh annually for the principal component of EMIs, subject to their ownership and repayment share. However, the property must not be sold within five years from the end of the financial year in which possession was obtained, or the claimed deductions will be reversed and added back to income in the year of sale.
Additional Deductions under Section 80EE and 80EEA
Co-borrowers who qualify as first-time home buyers can also benefit from additional deductions under Section 80EE and 80EEA. Section 80EE offers an extra deduction of ₹50,000 on interest payments for loans up to ₹35 lakh, while Section 80EEA extends this to ₹1.5 lakh for affordable housing loans. These deductions are over and above the limits under Section 24(b), providing extra savings for eligible taxpayers.
Is Home Loan Interest Deduction Allowed in the New Tax Regime?
Under the new tax regime (Section 115BAC), most exemptions and deductions, including those under Section 80C, 80EE, and 80EEA, are not available. However, interest on a let-out property can still be claimed under Section 24(b). For self-occupied properties, this deduction is disallowed in the new regime. Taxpayers should compare their total deductions under the old regime with the tax rates under the new regime to determine which one offers greater benefits.
Documentation and Proofs Required for Claiming Deductions
To claim joint home loan tax benefits, the following documents are necessary:
Loan sanction letter and repayment schedule
Interest certificate from the lending institution
Property ownership documents (sale deed or registry)
Proof of EMI payments (bank statements)
Co-ownership and loan share details
Keeping these documents ready ensures smooth verification during tax filing and helps avoid scrutiny from the Income Tax Department.
Common Mistakes to Avoid When Splitting Home Loan Deductions
Taxpayers often make errors while claiming joint home loan deductions, such as mismatched ownership and loan contribution details, claiming benefits before possession, or exceeding permissible limits. Another common mistake is when one co-borrower claims the full deduction without adjusting for the other’s share. Filing with accurate documentation and using automated filing platforms like TaxBuddy can help avoid these issues.
How TaxBuddy Helps Optimize Home Loan Tax Benefits
TaxBuddy simplifies the process of claiming home loan deductions by automating calculations for both co-owners. Its system identifies the correct claim limits under Sections 24(b) and 80C, validates payment records, and ensures compliance with ownership ratios. TaxBuddy’s expert-assisted filing option further ensures that each co-owner maximizes eligible deductions while maintaining complete accuracy and adherence to tax laws.
Conclusion
Joint home loans can be an excellent way to maximize tax benefits while sharing ownership of a property. By understanding how Section 24(b), Section 80C, and related provisions like 80EE and 80EEA work together, co-owners can reduce their overall tax liability significantly. Maintaining clear records, ensuring ownership consistency, and using expert platforms like TaxBuddy make the process smoother and more reliable.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Can both co-owners claim interest deductions under Section 24(b)?
Yes, both co-owners who are also co-borrowers can claim interest deductions under Section 24(b). For a self-occupied property, each individual can claim up to ₹2 lakh as a deduction on the interest portion of their home loan. If the property is rented or let-out, the deduction can be claimed in proportion to each co-owner’s share, without any upper limit on interest, subject to set-off restrictions.
Q2. What happens if one co-borrower is not a co-owner of the property?
Only co-owners of the property are eligible to claim deductions. If a person is a co-borrower on the home loan but does not legally own the property, they cannot claim any deduction under either Section 24(b) for interest or Section 80C for principal repayment. Ownership is a mandatory condition for availing home loan tax benefits.
Q3. Is there any limit on the total deduction if both co-owners claim separately?
Each co-owner can independently claim deductions up to the maximum limits allowed under Sections 80C and 24(b), provided they contribute proportionately to the loan repayment. For example, if two co-owners share loan repayment equally, both can claim up to ₹1.5 lakh under Section 80C and ₹2 lakh under Section 24(b). The total deduction claimed jointly cannot exceed the actual amounts paid toward the loan.
Q4. Can co-owners claim deductions before the construction is completed?
No, deductions for both principal repayment and interest payments are allowed only after the construction of the property is completed and possession is taken. Until then, the borrower can accumulate the pre-construction interest, which becomes claimable in five equal installments starting from the year the construction is completed.
Q5. What documents are required to claim joint home loan benefits?
To claim joint deductions, taxpayers must maintain and furnish the following documents:
Loan sanction letter and repayment schedule from the lender
Interest certificate showing year-wise breakup of principal and interest
Property ownership documents (sale deed or possession certificate)
Bank statements showing EMI payments by each co-owner
Proof of contribution if EMIs are paid from separate accounts
These documents help establish the ownership ratio and validate the repayment share.
Q6. Can deductions be claimed for a property jointly owned by family members?
Yes, deductions can be claimed for a property jointly owned by family members, such as spouses, parents, or siblings, provided all are co-borrowers of the loan and have ownership rights in the property. The tax benefits are divided according to the actual ownership and repayment ratio agreed upon between the co-owners.
Q7. Are there any additional benefits for first-time home buyers?
Yes, first-time home buyers can claim additional deductions under Sections 80EE and 80EEA. Section 80EE allows a deduction of up to ₹50,000, while Section 80EEA provides up to ₹1.5 lakh for affordable housing loans. These are available over and above the deductions under Sections 80C and 24(b), provided all eligibility conditions regarding property value and loan sanction dates are met.
Q8. Can interest deduction be claimed for pre-construction period?
Yes, borrowers can claim deductions for the interest paid during the pre-construction period. This accumulated interest can be claimed in five equal annual installments starting from the year in which the construction is completed or possession is taken. However, the total interest claimed in a year, including pre-construction interest, cannot exceed ₹2 lakh for self-occupied properties.
Q9. Is there any restriction on claiming joint deductions under the new tax regime?
Yes, under the new tax regime (Section 115BAC), most deductions, including those under Sections 80C, 80EE, and 80EEA, are not allowed. However, interest deductions under Section 24(b) for rented or let-out properties are still permitted. Therefore, co-owners who want to maximize deductions should generally opt for the old regime.
Q10. What if the property is sold within five years of possession?
If a property is sold within five years of possession, the total deductions claimed under Section 80C for principal repayment are reversed. These amounts are added back to the taxpayer’s income in the year of sale and taxed accordingly. However, the deductions claimed under Section 24(b) for interest payments remain unaffected.
Q11. Can co-owners claim different proportions of deduction if their repayment shares vary?
Yes, co-owners can claim deductions in proportion to their actual contribution toward loan repayment. The share of ownership and the proportion of EMI payments should be clearly documented through bank statements or lender certifications. This ensures transparency and prevents disputes during tax assessment.
Q12. How can TaxBuddy help maximize joint home loan tax benefits?
TaxBuddy’s AI-driven platform simplifies the process of claiming joint home loan deductions. It automatically identifies each co-owner’s share in the repayment, applies correct limits under Sections 80C, 24(b), and 80EEA, and ensures accurate reporting in ITR forms. With expert-assisted filing and real-time validation, TaxBuddy helps taxpayers claim all eligible benefits while staying fully compliant with the Income Tax Act.
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