EXPLAINED! Increase your Income Tax benefit on home loans by making your partner co-applicant and co-owner

Income Tax Act 1961, allows you to avail certain benefits with respect to home loans. The income tax benefits are available under Section 24(b) for interest paid and under Section 80C for the principal repayment, subject to certain conditions. According to tax and investment experts, if a couple opts for a joint home loan, it will enhance their home loan eligibility. However, there is considerable confusion, about who can claim the home loan benefit and how much tax benefit can be claimed, with respect to joint home loans. As per experts, in the case of a joint ownership of any house property, you are taxed as an individual with respect to your share in the property. Section 26 of the Income Tax Act, gives clear-cut guidelines, for taxation of your share in the jointly owned property.

Pointing out the basic condition for claiming income tax benefit on joint home loan; Balwant Jain, a Mumbai-based tax and investment expert said, "A basic condition for claiming tax benefits, is that you should be a co-borrower of the home loan, as well as a joint owner of the property. Unless you satisfy this basic condition, you cannot claim the tax benefits on the home loan. In certain cases, a person merely joins another immediate family member (father, son or spouse), to enhance the loan amount eligibility, without having any share in the property purchased. In such cases, the co-borrower, who is not a joint owner of the property, cannot claim the tax benefits on such home loans. This is one of the reasons that you should buy the property in joint names and then, individually claim the tax benefits."

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It may also happen that you may be a joint owner, as well as a co-borrower but are not servicing the home loan. In such a situation, you cannot claim the tax benefits on the home loan, as the tax benefits are available with respect to the amounts paid by you. "For one self-occupied property, you can claim interest benefits up to a limit of Rs 2 lakhs, in case of each of the joint owners. For home loan repayment, each co-borrower can claim tax benefits under Section 80C, up to Rs 1.50 lakhs every year, together with other eligible items. So, you will get the tax benefits on the home loan, in the ratio in which you are servicing the home loan," said Jain.

On how does the share of joint home loan borrowers is fixed; SEBI registered tax and investment expert Jitendra Solanki said, "Your share in the property is fixed at the time of purchase of the property. It may be by way of contribution towards down payment, as well as your share in the home loan. The share in the house property can be presumed to be equal, unless there are other circumstances to warrant otherwise."