For many individuals and families in India, owning a home is a cherished goal. It not only offers a sense of security and stability but also serves as a means to build long-term wealth. To turn this aspiration into reality, people often turn to home loans to finance their property purchases. However, opting for a joint home loan can provide you with substantial tax benefits.
A joint home loan involves two or more individuals, usually family members, joining forces to secure a loan for purchasing a property together. This arrangement allows the borrowers to share the burden of loan repayment among themselves and also increases their eligibility to obtain a higher loan amount. Typically, joint home loans are popular among spouses, siblings, or parents and children who wish to pool their resources and invest in a property collectively.
Exploring Tax Advantages of a Joint Home Loan:
Tax Deduction on Interest Payment:
One of the significant benefits of opting for a joint home loan tax benefit is the tax deduction available on the interest paid. As per Section 24(b) of the Income Tax Act, 1961, each co-borrower of a joint home loan can claim a deduction of up to ₹2 lakh per year on the interest paid towards the loan. This deduction is applicable for both self-occupied properties and properties that are rented out. Therefore, if you and your co-borrower(s) collectively pay more than ₹2 lakh in interest, you have the opportunity to divide the deduction among yourselves, resulting in reduced tax liability.
Tax Deduction on Principal Repayment:
Aside from the interest deduction, Section 80C of the Income Tax Act allows individuals to claim a deduction for principal repayment of their house loan. Each co-borrower is entitled to a maximum deduction of 1.5 lakh per year. When you choose a shared home loan, you and your co-borrower(s) can claim this deduction jointly, resulting in significant tax savings.
Increased Loan Eligibility:
The combined income of all co-borrowers is used to evaluate loan eligibility when applying for a shared house loan. This can be helpful for people who have a low individual income but a high combined income. You can potentially qualify for a greater loan amount if you include co-borrowers with dependable income sources, such as salaried persons or working professionals. This enhanced eligibility allows you to look into larger or higher-quality residences while still benefiting from the tax advantages associated with home loans.
Dividing the Loan Repayment Responsibility:
Choosing a joint house loan allows for a fair allocation of financial obligation among co-borrowers. This arrangement is especially advantageous for young couples or families with several sources of income. The monthly Equated Monthly Installment (EMI) becomes more reasonable by dividing the burden, allowing you to maintain financial stability. Furthermore, shared responsibility reduces risk by making numerous individuals liable for the loan, lessening the load on each borrower.
Versatility in Property Ownership:
Individuals with joint house loans have more options when it comes to property ownership. Co-borrowers have the option of becoming joint owners of the property in proportion to their loan contributions. This enables family members to work together on real estate ventures and share the benefits of property ownership. Furthermore, in the event of future sales or transfers, the capital gains tax burden can be shared among the co-owners, strengthening the benefits of joint ownership even further.
In conclusion, joint home loans offer incredible tax benefits for individuals and families in India. Don’t forget to check out the new income tax slab rates for the current financial year. By sharing the financial responsibility, it becomes easier to afford and repay the loan. Tax deductions on interest payment and principal repayment can significantly reduce tax liability.
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