Income Tax Benefits against repayment of Home Loan principal and Interest- Loan taken jointly or in single name

While taking a home loan one should keep in mind certain Income Tax Benefits against repayment of home loan. Repayment of Home Loan can be broken into 2 parts:

1. Repayment of the Principal Amount
2. Repayment of the Interest on such Home Loan

Repayment of the both components can be claimed as a deduction under the different sections of the Income Tax Act while filing the income tax return.

Section 80C of the Income Tax Act: Deduction on repayment of Principal Amount

The Repayment of Principal Amount of the loan taken is allowed as a deduction under 80C of the Income Tax Act. However, such deduction under section 80C for the repayment of the principal amount is allowed to Individual and HUF only.

A taxpayer can claim a maximum of Rs.1, 50,000 as a deduction under section 80C of the Income Tax Act.

This deduction of Rs.1, 50,000 under Section 80C includes amount invested in Tax Saving Fixed Deposits, National Savings Certificate, PPF Account, Senior Citizens Saving Scheme, Equity Oriented Mutual funds etc.

Deductions under section 80C of the Income Tax Act are allowed only on payment basis irrespective of the year for which the payment has been made.  The Registration Fee and Stamp Duty paid by the taxpayer are also allowed as deduction U/s 80C even if the assessee has not taken Loan.

However, the deduction for repayment of principal amount of the loan is allowed only after the completion of the construction and the completion certificate of the house has been awarded.

Section 24: Tax Deduction on Interest on Home Loan

The payment of interest on Home Loan is allowed as a deduction U/s 24 of the Income Tax Act. According to Section 24 of the Income Tax Act, the Income from House Property shall be decreased by the amount paid as Interest on a home loan.  However, the purpose of the home loan shall be Renewal, Repair, Reconstruction, Purchase, and Construction of a House Property.

No maximum limit of Interest that can be allowed as deduction in case of let out Property- The maximum tax deduction allowed U/s 24 of the Income Tax Act is 2 lakhs for a self-occupied property.  Moreover, where the house for which the Loan has been taken is not self-occupied, then no maximum limit of deduction has been defined and the assessee can avail the whole interest paid as a deduction under Section 24.

In general, borrowers of home loan willing to take a Joint Home Loan rather than going for a single home loan,  the logic behind taking a joint home loan is to get higher loan amount and also to avail Income Tax Benefits.
In the following cases, the above limit of Rs 2, 00,000 for SOP shall be reduced to Rs. 30,000

– Where assessee borrowed Home Loan before 01-04-1999 for any reason related to house property.
– Where assessee borrowed Home loan after 01-04-1999 for any reason other than acquisition or construction.
– Where the acquisition/construction of the house property is not completed within 5 years from the end of the relevant financial year (3 years till the financial year 2015-16) in which loan was borrowed.
In general, borrowers of home loan willing to take a Joint Home Loan rather than going for a single home loan, the logic behind taking a joint home loan is to get higher loan amount and also to avail Income Tax Benefits.

Joint home loan can be taken by upto 6 applicants- Usually, a Joint Home Loan can be taken by 6 people which is the maximum. (minimum being two applicants).

• A co-borrower of the home loan may or may not be the co-owner of the house property. However, Banks recommend a co-borrower to also be a co-owner of the house property.
• Both the co-borrowers are collectively liable for the repayment of the home loan.
• In Case of married couples, it is a perfect arrangement for the providers of the home loan. The couples are free to decide whether they want to be co-owners of the property or if only one of them wants to be a co-borrower of the loan.
• In General, friends or unmarried couples whether living together or not are not allowed to take joint home loans.
• All the borrowers are entitled to claim deduction of interest to the respective limits

Also Read- Income Tax Benefits where home loan is disbursed partially