Home Loan for Joint Owners: Tax Benefits and ITR Filing for Joint Owners
- Nimisha Panda
- Jul 15
- 8 min read
Updated: Jul 17
Purchasing a home is a big financial decision that entails recurring expenses beyond the initial purchase. Home loans are a long-term commitment with monthly EMIs that affect your budget, even while they make owning more attainable. There are several tax advantages to taking out a joint home loan with your spouse or a family member. If certain requirements are fulfilled, each joint owner may benefit from tax advantages on a shared house loan. It's important to remember that obtaining any tax benefits associated with the property requires "ownership" of the property. Even though you took out the loan jointly, you might not be eligible for the tax benefits unless you are the property's owner or co-owner. In certain cases, a parent and child jointly own the property and the youngster is the only one who repays the debt. In this article, we will highlight the tax benefits for home loan taken by joint owners.
Table of Contents
What is a Joint Home Loan?
A joint home loan is a type of housing loan that is taken out jointly by two people, with equal repayment obligations. Family members such as parents, siblings, spouses, and children may be co-applicants. There are numerous advantages to having a shared home loan. Your loan amount rises in the first place, and as the tax burden is split between the two, it falls in the second. The primary advantage, however, is the tax advantages that both parties can avail of. A home loan can open tax benefits under Section 24(b), Section 80 (EE), Section 80EEA, and Section 80C, 1961. A shared house loan also offers numerous tax advantages, which can save a lot of money.
Eligibility to Claim the Tax Benefit on the Property
You have to share ownership of the property. You must be the property's owner in order to be eligible for tax benefits for a home loan. Frequently, a loan is taken out jointly, but according to the property records, the borrower is not the owner. You could not be eligible for tax benefits in such a situation.
As per the loan documents, you must be an applicant and an owner and a co-borrower. Owners who do not make EMI contributions and are not borrowers will not receive any tax benefits.
The property must be fully constructed. Tax benefits on a home can only be claimed in the year that the property is finished. A property that is still under development is not eligible for tax incentives. However, any interest paid prior to construction completion can be claimed in five equal installments starting in the year that work is finished.
Tax Benefits for a Joint Home Loan
Here are the details of the tax benefits available:
Until the loan's maturity, the principal amount of the home loan may be tax deductible annually up to Rs. 1.5 lakhs. Additionally, this exemption supports other investment plans such as PPF and LIC. However, only fully constructed homes are eligible for a Section 80C tax benefit. The property must be self-occupied as well.
For self-occupied homes, you and your co-owner may each claim a yearly tax deduction of up to Rs. 2 lakhs under this section. Up until the loan's maturity, this claim may be made annually on the interest portion of the mortgage. The only requirement is that the home's construction be completed within five years of the loan's inception. The tax benefits will be lowered to Rs. 30,000 annually if the requirement is not fulfilled. For example, Mr. A and his son paid Rs. 5 lakhs in interest on their home loan and are co-owners of a property. In that scenario, the father and son are eligible for a yearly tax advantage of Rs. 2 lakhs apiece.
For rented homes: In the event that Mr. A and his son want to lease their jointly owned home, which has a home loan attached to it. The proportion at which they will split the yearly tax advantage will not change in this scenario. A tax incentive of Rs. 1 lakh will be available to them each year.
Each member may claim an extra Rs. 50,000 in tax savings on interest repayment if they are a first-time borrower. But the property shouldn't be worth less than Rs. 50 lakh. Additionally, no more than Rs. 35 lakh should be borrowed. Furthermore, Section 80 (EEA) has been included.
Deemed Ownership
The situation of deemed ownership is explained in Section 27 of the Income-tax Act. When someone transfers their property for insufficient consideration to their:
Spouse
A minor child (a daughter who is not married)
According to the Act, the individual transferring such property will be considered the property's owner.
Illustration
Consider a scenario in which a paid husband and his homemaker wife jointly purchase a home. The full consideration for such an acquisition is paid by the husband, who is the only provider. He now rents out such a house. The wife is able to pay no taxes on her 50% rental income because she has no taxable income. Since the spouse paid full consideration for the property purchase in these situations, it is assumed that the entire property belongs to him, and rental income must only be reported as his income in his ITR.
ITR Returns E-Filing for Joint Owners
The following procedures must be followed in order to file an ITR in a co-ownership situation:
Step 1: Determine the property's Gross Annual Value (GAV). The Net Annual Value (NAV) is calculated by subtracting municipal taxes. To calculate the income from the home property, subtract the interest on the home loan and apply the standard deduction (30% of NAV). This computation will be made by each co-owner according to their ownership stake.
Step 2: Decide on the correct ITR Form. The ITR form you choose is determined by your revenue sources:
ITR-1: Individuals earning up to Rs. 50 lakh who have income from salary, one home, other sources (such as interest), and agricultural income up to Rs. 5,000.
ITR-2: For individuals and Hindu Undivided Families (HUFs) who do not receive income from their business or profession's profits and gains.
ITR-3: For people and HUFs who make money from their businesses or professions
Step 3: You must fill out the ITR form with the property's address, co-owner information, and income or loss share.
Step 4: Make use of all the qualified deductions that are offered by Sections 24(b) and 80C.
Step 5: Verify that your ITR accurately reflects any Tax Deducted at Source (TDS) that may have been applied to your rental income.
Conclusion
By taking advantage of joint home loan tax incentives, you can accomplish your ambition of home ownership while drastically lowering your tax obligation. You can save a significant amount of money on taxes each year by utilizing the deductions that are available for principal repayment and interest paid. Make sure all co-borrowers are also co-owners of the property and keep up-to-date documents in order to maximize the benefits of joint loans for a home. To claim individual deductions, precisely calculate your tax benefits and complete separate tax forms.
Frequently Asked Questions
What is a joint housing loan declaration?
This declaration, which is signed by both property owners, details the portion of the housing loan that each co-owner is responsible for paying.
Who can apply for a joint home loan?
In a combined house loan plan, co-borrowers can only be parents, siblings, children, spouses, or close relatives.
What is the benefit of taking a home loan with working parents/spouses?
This enables you to apply for a larger house loan and pool a large income. Furthermore, there is less of a payback load. Additionally, the lender may give you a longer tenure if you take out a home loan while your parents are getting close to retirement age.
What is the benefit of taking a home loan with a non-working spouse/parents?
You can benefit from reduced stamp duty and interest rates if you take out a joint home loan with your parents or a spouse who is not employed.
What is the 24(b) deduction for joint owners?
Joint owners may deduct interest on the portion of their housing loan that they are repaying under Section 24(b).
Can husband and wife both claim tax benefits on home loans?
Yes, a deduction of up to Rs 200,000 can be claimed by both the husband and the wife provided they both contribute to the repayment of the loan. Therefore, a total interest deduction of up to Rs 400,000 may be claimed. Additionally, Rs 150,000 each can be claimed in 80C on the major portion. To get the most tax benefits, this is a smart tax planning technique.
Can I claim tax exemption for a property in my wife's name for which I am paying full EMI since I am the deemed owner?
You will be considered the owner of the property if you pay the full amount required to purchase it, according to Section 27 of the Income Tax Act. You can therefore claim any interest or rental income that you get from the loan. However, from the perspective of practical execution, it could be challenging to support the claim of considered ownership because your name is not on the sale deed or the housing loan document. Making oneself a co-owner and co-borrower of such property and loan where it will be simple to prove the claim is therefore advised.
Is a marriage certificate needed for a joint home loan?
A marriage certificate is not necessary because anyone can apply for a joint home loan.
I am thinking of buying a home for my family, should I opt for an individual home loan or a joint home loan?
Given the tax advantages that co-owners of a home property enjoy, you might want to consider choosing a joint home loan.
Can I claim a 100% tax benefit as a co-owner?
Yes, whole 100% tax benefit can be claimed by the co-owner if they do not claim their portion of the exemption and a declaration is given.
Can 80EE and 80EEA both be claimed?
Since the application of Sections 80EE and 80EEA occurs in different fiscal years, they are mutually exclusive and cannot be claimed together.
All home loans approved between April 1, 2016, and March 31, 2017, were subject to Section 80EE.
Every home loan approved between April 1, 2019, and March 31, 2022, was subject to Section 80EEA.
Is there any restriction that joint home loans should be taken with relatives only?
No, you are not required to take out a joint house loan with a relative in order to receive the tax benefit.
Can I take a joint home loan with my friend and avail the tax benefit on interest deduction?
Yes, that is feasible. As long as you and your friend are co-owners of the property, you can take out a combined house loan and receive an interest deduction.
Can I add interest paid on the home loan as the acquisition cost of the property?
No, you cannot add interest to the cost of purchasing a property if you have already deducted it from your income taxes.
Which ITR form should I use for reporting income from a jointly owned property?
If you just own one self-occupied property and meet other requirements, you can file using the ITR-1 form.
If you have several homes or rental income, use ITR-2.
If you have both company and real estate income, you must file an ITR-3.
What documents should co-owners maintain for tax filing?
To guarantee seamless ITR filing and compliance, co-owners should keep track of property purchase agreements, home loan statements, municipal tax receipts, rental agreements (where applicable), and documentation of TDS deductions.
Can there be a change in the ratio of tax benefits on home loans for joint owners?
To receive tax benefits, both people must be co-owners of the property. Joint owners are eligible to receive a tax refund based on their respective shares of the home's value. It implies that while determining their portion of a home loan, a joint owner might take their spouse's ability to repay the loan into account. Therefore, the tax benefits will be distributed in the same proportion if the joint owners are equal but their loan share is 60:40. Even tax benefits will change if this ratio is adjusted to 70:30.
What happens if the ownership share is not specified in the purchase deed?
For tax purposes, the ownership share is presumed to be equal among all co-owners if it is not specifically stated in the property purchase document.
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