Many people choose to apply for a loan when making a big purchase like buying a home. It is never wise to empty your bank account and make it run dry just to get a roof over your head. Another reason why people opt up for home loans is because certain tax benefits come hand to hand with them. Under the section 24 (b) of the Income tax Act, one can achieve a lot of benefits in regards to interest payment when a loan is applied for. Also, section 80C allows you favours in matters of principal payments. The most important thing that needs to be kept in mind when claiming tax benefits on a real estate property is that you need to be the co-owner of the property and also be an equal part of the borrowing process. This point is necessary to be remembered because you will only be entitled to claim the loan if you are also the co-owner of the property. For example, if a property is owned only by the father but the loan is under the name of both, the father as well as the son, then only the father gets to enjoy the tax benefits.
What is required to claim tax benefits on a property?
To claim tax benefits on a property these are should be checked on the list:
● Co-own the property
As mentioned above, you must be the owner of the property for while you are taking the loan. This means, all the legal papers of the property should be in your name along with your partners.
● Must be co-borrower of the loan
To enjoy the benefits, you need to be equally responsible; therefore, you must be the co-borrower of the home loan. This means, you shall be held responsible as much as your partner will be in case there arises an issue with the payments.
● The property must be a completed project
In order for you to claim the tax benefits, the project for which the loan is asked for needs to be a completed project and not one that is undergoing construction or is to be made in future. Also, any expenses prior to completion are claimed in five equal installments starting the year in which construction is complete.
Once you make sure that all these three conditions are met, there are various joint ownership tax benefits that you can enjoy in the purchase.
Everything you need to know about tax benefits on joint home loans:
● How to claim tax benefits on joint loan?
You can be able to claim tax benefits on a joint loan by simply making sure that you are a part of the legal documents of the loaning process, i.e. by having your name present in the owner as well as the borrower sector.
● What are the benefits of joint home loan?
– They make your loan more eligible.
– Both the partners can avail higher tax concessions.
– Female co-owners have special interest rates.
– The burden of loan repayment gets divided and shared.
– You can choose a bigger housing option
– Higher tax benefits
● Does the co-borrower have to be a co-owner to claim tax benefits?
Yes. It is absolutely necessary for a co-borrower to also be the co-owner in order to avail the tax benefits. There are no two ways about it.
● What is the difference between co-applicants versus co-Owner?
Many people confuse a co-applicant with a co-owner. These two might look similar but aren’t the same. A co-owner is someone who has equal rights on the property for which the loan is being applied for. Whereas a co-applicant is not required to be an owner of the property as they are an additional applicant involved in the underwriting. Even without being the owner, a co-applicant is completely responsible for the loan in case the partner backs off and refuses to participate in partnership or dies.
● Can home loan interest be deducted on taxes?
The income tax laws indeed allow a person to claim the interest paid as a deduction from the gross total income.
● Does income tax get affected from home loans?
According to the income tax laws in India, a person can have deduction in income tax amount as a repayment of the principal component in the housing loan.
● Can interest deduction be claimed by both spouses?
Both the spouses can claim deduction if the EMI amount is paid by the assesses. The deduction limit is often based on the amount of share you have in the property.
● Can I get tax benefits on two home loans?
Yes, you can get tax benefits on two home loans only if one of them is a self loan. You cannot have two joint loans at once.
● Which way of applying for a loan is better? individually or jointly?
Applying for a joint loan is always better than applying for an individual loan. Not only does this reduce the pressure of interest on one person but also increases the chances of the loan getting sanctioned.
● Under section 80EE who can claim deduction?
Only individuals can claim deduction under section 80EE. The article does not specify whether the person claiming deduction needs to be someone who lives in the country, so non-residents too can. Also, a company, AOP, HUF, or other types of taxpayers cannot opt up for this option as they do not fall under the category of an individual.
● What is the section 24 income tax act and how can one avail interest on the home loan?
According to the section 24 of Income Tax Act, homeowners can claim a deduction up to 2 lakhs. The only condition that needs to be met to avail internet interest on home loan is by being a resident in the property or having a family member live in it. The interest stands cancelled if the owner gives it out on rent to tenants.