Skip to main content

What are Joint home loan and Income tax benefits?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Joint home loan and Income tax benefits

 

What is joint home loan?

A home loan where there is more than one borrower termed as joint home loan. These co borrowers can be spouses, parents, children etc. Co borrowers in joint home loan have to be in blood relation. No two friends can be co borrowers. In fact banks sometimes avoid giving loan to siblings unless they are co-owners in the property. This also happens in the case where loan is taken with parents as co borrowers. It is only in the case of spouses where banks don't demand the co ownership on the said property of co borrowers.

Having a joint home loan is advantageous when both the co borrowers are tax payers. But do keep in mind that to claim income tax benefits in joint home loan all the co borrowers should be the co-owners and the tax benefits can be claimed in the same ratio as the ownership is.

A co-owner who is not a co borrower is not entitled to income tax benefits. Similarly a co borrower who is not a co-owner cannot claim tax benefits. Below are few examples which will make this concept clear.

Flat value – Rs 75 lakhs

Loan amount – Rs 60 lakh

EMI for 20 years @ 10% p.a (reducing) – Rs 57901/- p.m

Case 1 – Husband (H) and Wife (W), both are working and tax payers. H purchases a flat in his own name and to manage the burden of EMI, takes home loan with W as a co borrower. In this case though W is the co-borrower and contributes in the EMI, still she would not be eligible to claim any tax benefit u/s 80C or section 24. i.e. in all years only H can claim up to Rs 1.50 lakh in interest payment and 100% of principal or Rs 1 lakh whichever is less.

Case 2 - H and W, both purchases a house with co ownership of 50:50 and also took home loan jointly. In this case both H and W can claim the income tax benefit of Section 80C and section 24 in equal proportion. i.e The complete interest payment and principal will be divided equally in H &W and both can claim separately Rs 1.50 lakh u/s 24 and Rs 1 lakh or 50% of principal whichever is less

Case 3 – H and W both purchase a house with a co ownership of 75:25 and also took home loan jointly. In this case both H and W can claim income tax benefit of section 80C and Section 24 in the ratio of ownership. i.e The interest and principal payment will be divided in the ratio of 75:25 and both H&W can claim income tax benefit in this ratio only, up to the maximum limit allowed.

Please note that in all the above cases the tax benefits that have discussed are on self-occupied house. In case of let out or deemed to be let out house ,No principal payment but 100% of interest payment can be claimed under section 24 by both the co borrowers in the ratio of their ownership.

Advantages of having a Joint home loan

  1. One major advantage is the income tax benefit that gets divided in co-owners.
  2. Second advantage is the increases in chances of getting loan and also increase in the loan eligibility.

Disadvantages of having Joint home loan

1. As explained in the article that self-occupied property is the one which is occupied by the owner for self-residence, and if there's any other property purchased will be treated as "Deemed to let out" and taxed accordingly. So in case of joint home ownership, if any of the co-owner purchases some other property in the same city will be treated as "deemed to let out".

2. If any of the co borrowers has bad credit behaviour due to which repayment of home loan goes irregular, this will affect the credit score of other co borrower too.

3. If due to any dispute, any of the co borrowers refuses to repay the loan, please be warned that as per loan schedule the liability to repay the loan is joint and several on the part of each co borrower. This means all the co borrowers are liable to pay up to as much as all repayments. Lender may also sue both the co applicants to recover the dues.

4. We all are emotional beings. Under the lure of getting access to high credit eligibility which may help in buying a big house, we tend to forget how the EMI burden will going to affect the other goals.

Though Banks provides loans to spouses with no compulsion on having co ownership, it is advisable for both spouses to have some ownership. Before becoming a co applicant make sure that you have some percentage of ownership in the property. Also, if you are co borrower, you could perhaps draw up and sign an agreement with your spouse on splitting the liability. This is to avoid any dispute in future.

Hope you have understood that where joint home loan brings income tax benefits along with, it has to be used with caution and proper financial planning, to tackle any issue later in life.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
Read more

Health insurance guide - Part I

Insurance, by definition, is morbid. What if I die suddenly? What if my home caught fire? What if I had to undergo expensive medical treatment? What if something that I thought happened only to others befell me? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. However, the possibility of you undergoing some kind of expensive medical treatment during your lifetime is far more likely than you dying suddenly or your house burning down. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years 10 months or so, the rest of your money life could easily go out of whack if you had to incur such expenses. Just 12 per cent of India's population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insu...
Read more

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Read more

10 year NSC launched, all set to give 8.7 per cent

Invest in Mutual Funds Online Download Mutual Fund Application Forms THE government introduced a 10-year National Savings Certificate ( NSC ), which will earn an interest rate of 8.7 per cent per annum. The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said. The scheme will come into effect from December 1, it added. Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC. There is no upper limit for investment in the certificate, it added. The new scheme will give better returns along with tax benefit to savers. At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C. The decision to raise the maturity period of NSC has been taken on the b...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now