Did you know that you could claim tax benefits against your home loan? Of Course, you know. But you might want to know the nitty gritties of the claim procedure or for that matter this tax exemption or how it works in the place, especially when it comes to joint home loans. One cannot deny the fact that saving tax is one of the most appealing benefits of taking a home loan. It also helps you invest in a fixed asset. Also once you acquire a housing loan, you become eligible for tax deductions under Section 80C and Section 24 of the Income tax Act, 1961.
Things You Should Know About Tax Benefits Against Joint Home Loans
- When it comes to a joint home loan the benefits for tax are divided among co-applicants. This means that more than one can enjoy the tax benefits especially if the per annum payment against the loan can be divided. That too with just one product i.e. home loan.
- The proportion of the division of tax exemption is based on the ratio of of the ownership of the loan.
- Each applicant has the right to claim the maximum tax rebate individually through the home loan which is Rs. 1.50 lakh (One Lakh up to AY 2016-17) per person and upto to Rs. 2 lakhs for principal amount repayment.
- The most important condition for this sort of home loan and the tax exemption is that, obviously the home loan has to be taken in the name of two individuals.
- Naturally the entitlement of each individual in the joint ownership should be mentioned clearly in papers in percentage for each of the co-owners.
Types of Tax Benefits for Joint Housing Loans:
There are basically two types of tax benefits that can be availed against a joint housing loan which are as follows:
- The interest that is paid against the home loan has the eligibility for a tax deduction for up to Rs. 2 lakhs for every year of the repayment term, from income of the individual. This provision is available through Section 24 of the Income Tax regulations applied for instance where the property is self-occupied or has a singular ownership with property being vacant.
- Tax exemption is available on the repayment for the Principal amount of Loan up to Rs. 1.50 lakhs. This provision is available through Section 80C, of the Income Tax Act.
It is essential to plan the entire tax rebate in such a way that both owners can benefit from this provision so that the complete repayment amount is utilized for tax benefits for both individuals. It is a recommended to seek the help of a professional to get it right.
What if The Source of The Housing Loan is Not a housing Loan But Friends or Family?
First of all, are you paying interest to the money lender who may be your relative or friend. If yes, then the interest payment to the lender is exempted under section 24. However these people have to provide a certificate for the same. In case one does have this certificate the tax exemption will not be possible. The recipient of the interest income is also liable to pay incomes tax. The principal amount does not qualify for any tax benefits, which is why people have shifted from friends and relatives to banks for buying a house.