How To Calculate Income Tax Benefit on Joint Home Loan ? – In the latest budget speech finance minister has announced that tax incentives limit of deduction on interest paid on borrowed funds for a self-occupied house would be increased. If this is the case of Joint ownership, tax benefit also doubles.As per the Income Tax rule tax benefits on a joint home loan can be availed by all the joint owners based on the certain condition which are needed to be fulfilled.
This is to remember that housing loan buyers can avail the combination of different deductions and exemptions i.e. deductions under section 80C, 80CCC, 80D, 24(b) for maximize the income tax benefit.
The EMI i.e. equated monthly instalments (EMIs) of a home loan consist of two parts—interest and capital repayment. Income Tax benefit on capital repayment or principal parts comes under section 80C within maximum limit of Rs.1.5 lakh a year. The interest portion comes under section 24(b) and the limit is Rs.2 lakh for self-occupied house.
Benefit of Joint Ownership
Key Highlights :
Any housing loan may be availed in joint ownership as co borrower. The joint borrower ship of housing loan allows both the borrowers to become eligible to claim tax benefit against the same house.
For Example : Any housing loan of amounting Rs 40 lakh at the rate of 10% interest per annum, will accumulate the Interest of approx Rs.4 lakh in initial financial year. As per the Income Tax law single borrower can have the tax benefit of Rs 2 lakh each year if self occupied house but in case of joint borrowership they can together claim Rs.4 lakh. A big saving for other investments.
Important Condition to Met Before Claiming Tax Benefit in Joint Name
Following instruction must be fulfilled before claiming the Income tax benefit for joint ownership house.
1. The house should be registered in the name of both the borrowers.
2. The share of rights over the property should also be clearly mentioned in the registry papers.
3. Based on the share of right of property the division of interest can be claimed in the same proportion by each co-applicant.
Example : Suppose the ratio of ownership of house is 50:50 , and housing loan of Rs 40 lacs in the joint name in such condition the loan amount would be split in the ratio od 20 lacs each and tax benefit on the interest paid can be claimed based on the loan amount against each co-applicant.