When you plan to take a home loan, it makes sense to opt for a joint loan rather than an individual loan, and below is an explanation for the same (advantages of joint loans) :

i)  Higher Eligibility : As the incomes of both the borrowers is considered to calculate the total loan eligibility, you can get a higher loan in a joint loan compared to an individual loan. And higher loan lets you purchase a bigger home if necessary, or to invest in a second home which could be purely for wealth creation.

ii)  Higher Tax benefits : These benefits are explained in detail in the next sections.

iii)  Sharing of debt burden among borrowers : In a joint loan, the responsibility to repay lies equally with the borrowers (irrespective of share of ownership in the property) and hence, the burden is shared among all the holders so that no individual is burdened with the responsibility of paying off the entire loan. But this could also be a disadvantage of a joint loan and is explained in the next section of this article.

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TAX BENEFITS :

From a taxation point of view, a joint home loan is also beneficial as all co-borrowers can claim tax deductions under Section 24 of the Income Tax Act against interest repaid and under Section 80C against principal repaid. From an income tax perspective, while the provisions for tax benefits remain the same, the total benefits available in absolute terms may be higher in a joint loan as compared to an individual loan. In other words, every assessee (person paying the income tax) can enjoy the tax benefits available in respect of both the principal and interest being paid during a financial year, on proportionate basis (i.e. the tax benefits that can be claimed would be in proportion of the share that the individuals have in the loan).

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In case the property for which the loan has been obtained is self-occupied :

i)  upto Rs 1,50,000/- is allowed for deduction on account of interest paid under Section 24.

ii)  upto Rs.1,00,000/- is allowed for deduction on account of principal repaid under Section 80C. #

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In case the property for which loan has been obtained is not self occupied :

i)  entire interest amount is allowed for deduction on account of interest paid under Section 24. i.e. the total interest paid in a financial year minus the income/rent actually or deemed to be generated by the property is allowed for deduction on account of interest paid under Section 24. For example, if the interest paid for the entire financial year is Rs.3,30,000/- and the rent generated is Rs.1,20,000 per annum, then you can deduct Rs.3,30,000 – Rs.1,20,000 = Rs.2,10,000 from your taxable income.

ii)  Principal amount paid is not eligible for tax deduction incase of rented properties or second homes. The only exclusion is if the house is not in the city in which you are working – in which case you can claim an amount of upto Rs.1,00,000/- as deduction on account of principal repayment under sec 80C even if the house is not self occupied. #

Another important point is that there is no restriction on the number of houses for this benefit – the only restriction is that the house should be self occupied.

QUICK TIP : To claim above mentioned deduction against interest payment, the individual should obtain possession of the property. Incase person does not take possession of the property, then all deductions are reversed and all the applicable tax savings will have to be surrendered.

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Example : If a couple jointly apply for a loan for a self-occupied property to be held by them in equal proportion, then both the spouses would be able to claim deduction on the principal and the interest repaid separately from their incomes to the extent of their respective share in the house and the loan.

This would of course, be subject to the overall limits as specified under the act. If the total interest repayment made by them during the year is Rs 3 lakh and the principal repayment is Rs 6.5 lakh, then collectively the couple may be able to claim a deduction under section 80C for principal payment of Rs 2 lakh (Rs 1 lakh each) and under section 24 for interest payment of Rs 3 lakhs (Rs 1.5 lakhs each).

 

WHO CAN BE A CO-BORROWER?

Joint home loans can be obtained by an applicant along with his/her spouse, parents or own siblings. A borrower cannot take a joint home loan with just any person. It is given only to

i)  married couples

ii)  immediate blood relatives such as parents, brothers and children.

 

WHO CANNOT BE A CO-BORROWER?

Friends, sisters or unmarried partners living together are generally not permitted to apply for joint home loans. Friends, sisters or unmarried couples can be a co-owners of a property but they cannot be a co-borrower in a housing loan.

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Co-Owners of Property HAVE to be Co-Applicants to the loan : Incase a property is co-owned, the co-owners of the home will COMPULSORILY be considered as co-borrower in a joint loan.

Co-Applicants to a loan DO NOT NECESSARILY HAVE TO BE Co-Owners of a Property : A co-applicant to a joint loan does not have to be co-owner of the property. For example : A wife may be the sole owner of a property but her husband (although not being owner or having any share in that property) may still apply as co-applicant along with her to a home loan. This is because the wife may not have sufficient salary to get the required loan and hence husband is also included to combine their salaries to increase the loan eligibility.

Confused?! – A co-owner is a person who has a share in the property and a co-borrower is one who is liable to pay the loan amount.

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GET YOUR COMPLIMENTARY LOAN ELIGIBILITY ASSESSMENT :

Know your loan eligibility today to plan your investments better. Fill up this simple form and we will get back to you with your estimated eligibility :

[contact-form] [contact-field label=”Name” type=”name” required=”true” /] [contact-field label=”Email” type=”email” required=”true” /] [contact-field label=”Your Age” type=”text” required=”true” /] [contact-field label=”Residential Status” type=”select” options=”Resident Indian,Non Resident Indian” /] [contact-field label=”Your Monthly Net Income in INR” type=”text” required=”true” /] [contact-field label=”Spouse’s Monthly Net Income in INR” type=”text” /] [contact-field label=”Details of all your Existing Loans and the EMIs being paid on the same.” type=”textarea” required=”true” /] [/contact-form]

# : Total deductions allowed under Section 80C is Rs.1,00,000/- per person per financial year. Principal repayment is allowed as a deduction under Section 80C upto a max amount of Rs.1,00,000 including all other amounts allowed under Sec 80C such as life insurance premiums, ELSS mutual funds, etc.

DISCLAIMER : Tax laws are subject to revision from time to time. Although we have made every effort to make sure information presented above is correct at the time of publishing this blog post, G&C disclaims any responsibility for loss arising out of use of above advice. You are requested to consult your tax planner/CA on all above matters to ensure proper compliance of tax laws.

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By Jhashank Roy Chowdary (About the Author)

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