Benefits of tax and loan eligibility from home loan in joint names
A home loan provides an array of attractive benefits such as saving tax and providing money in need. One of the greatest benefits of a home loan is to save tax while preparing to invest in a permanent asset. The Section 80C and Section 24 of the income tax regulations makes a home loan seeker eligible for tax rebates.
How can a person avail tax benefits?
- In order to avail tax benefits, the property has to be jointly brought by the members in their joint names.
- The share of each member should be precisely mentioned in order to avoid any confusion about the percentage ownership of each co-owner.
- The tax benefits get divided among the co-applicants in a joint loan.
- The division among the members takes place in the same proportion in which the asset is owned by each co-applicant.
- Each co-applicant can claim a maximum tax rebate of up to Rs. 1 lakh for the principal repayment and Rs. 1.5 lakh for the interest payment.
What are the tax benefits of home loan?
- A home loan seeker can avail two types of tax benefits which are available on the repayment of a housing loan.
- Under section 24, the amount of interest paid on the loan is eligible for a deduction of about Rs.1.5 lakh annually from the income of the individual when the property is self-occupied.
- The repayment of the principal amount of the loan which is up to Rs. 1 lakh will be eligible for the deduction under Sec 80C. Also no part of the total repayment goes waste through a proper planning.
Tax benefit: One of the advantages for joint home loan takers
In case of a joint home loan, the members can avail the maximum tax benefits individually wherein each individual can claim a tax rebate of Rs. 1 lakh for principal repayment under the Sec 80C and Rs. 1.5 lakh for interest payment under Sec 24. These tax benefits are implied based on the proportion of the loan taken by each member of the joint loan. In order to claim the tax, the members from the joint loan should procure a home sharing the agreement and detailing the ownership proportion in a stamp paper depicting the legal proof.
Also in order to avail the complete benefits of the tax savings, it is advisable that the member with the higher pay should make the higher contribution towards the home loan which can eventually result in the benefit. However, an earning couple, it is even better as all the other expenses can be managed with the person with the lesser contribution. This will involve the optimization of the benefits on the principal and the interest repaid.
When should a person seek a home loan in joint names?
A person should opt for a home loan in joint names for the following;
- In case there is a need for a higher loan amount then the eligibility in individual capacity.
- In case the income tax savings by opting for a joint loan is significantly higher than a single-name loan.
- In case the person has enough eligibility as single applicant.
- In case the income tax savings by opting for a joint loan is not significantly higher than a single-name loan.
- In case a person plans to purchase another house in near future.
How does it increase the loan eligibility?
- A loan when taken by more number of people will increase the size of the loan as the bank combines the income of all the joint home loan members and hence sanctions a proportionately higher loan amount. This also gives the members to avail other additional benefits as well.
- A lower property registration fee is levied in case the property is owned by a woman.
- The succession issue is reduced if a couple jointly owns a property.
- For an under construction home, a person can claim the tax benefits once the construction is complete.
- Tax benefits can be enjoyed in case of a joint structure.
- Tax benefits can be availed in case of a joint account.
