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What is a joint home loan?
A joint home loan is a loan which is taken by more
than one person.
Terms associated with Joint home
loan?
Coowner: means a person who has a share in the property.
CoBorrower: A co-borrower is a person with whom you take the
home loan jointly. In India
Tenure of the loan: Period for which loan is taken
Documentation: A joint home loan requires both the applicants to furnish the
necessary Know Your Customer documents. This includes address proof, ID
proof, income proof and the bank statements of both the applicants, as well as
the proof of co-ownership of the property.
Repayment: Although the loan is taken by more than one person,
the EMI payment can be made fromonly
one bank account which
can be single or joint account of one of the borrowers. The borrowers can
choose to share the number of EMIs between them in the whole year.
Who can be the co-borrower?
The rules says any six persons can take home loan
jointly, but the banks and institutions have more restrictions co-applicants.
The restrictions are as follows:
·
A Joint Home Loan can be taken
by Husband and Wife or Parent and Child.
·
Friends cannot take Joint Home
Loans.
·
In some case brothers are
allowed to take the Joint Home Loans.
Tenure of loan depends on the co-borrowers.
·
If the
co-applicants of the joint home loan are spouses, then the maximum loan tenure
can be upto 20 years or 25 years, depending on the housing finance institution.
·
However, in case
the co-applicants share a parent-child relationship or are siblings, then the
maximum term is restricted to 10 years in most cases. In case of a joint
loan taken by a parent and child, if the repayment is linked to the parent’s
income, then the maximum loan tenure is restricted to the retirement age of the
parent.
Banks insist that, co-owners
must be co-borrowers for the Home Loans. It is not necessary that all the
co-borrowers must be the co-owners of the house.
What are the liabilities of taking
joint home loan?
All co-borrowers are jointly and severally liable to
repay the loan. It does not matter whether the payment is made in
the normal course by only one of the joint borrowers as long as the full EMI is
paid as per schedule. So if one of the borrowers refuses to pay the loan,
has to file for insolvency or passes away, it becomes the co-applicant’s
responsibility to settle the loan in full.
And do note that the repayment record on joint loans
counts for your CIBIL score. The Credit Information Bureau (India
The co borrowers taking the loan should ideally take
separate term life covers to reduce the financial burden on the other person(s)
in case of their demise.
Also, if you are a co-borrower, you could perhaps
draw up and sign an agreement with other co-borrowers (including your spouse)
on splitting the liability. This will avoid any clashes in future
What does Tax benefits of Home Loan
depend on?
Tax benefits on home loan can be be availed based on
following :
·
For constructed
house i.e house should NOT be in pre-construction
stage. You can seek Tax Benefits only from the financial
year in which the construction is complete.
·
Whether loan is taken for first
house or house other than first house
·
Whether the house is
self-occupied (means you are living in it) or not i.e. given on rent or
vacant?
·
You can claim
income tax exemption if you are a co applicant in a housing loan as long as you
are also the owner or co owner of the property in question. A co-owner,
who is not a co-borrower, is not entitled to tax benefits. Similarly, a
co-borrower, who is not a co-owner, cannot claim benefits. Before you sign
as a co-applicant in a home loan, make sure that you get a right to the
property as well. Registering the house in joint names will get you additional
tax benefits as mentioned earlier and your share in the property also becomes
indisputable.
·
The tax benefit is shared by
each joint owner in proportion to his share in the home loan. It’s important to
establish the share for each co-borrower to claim tax benefits.
What are the Tax Benefits on taking
home loan?
For claiming income tax deduction, the EMI amount is divided
into the principal and interest components. The Indian Income Tax Act
allows both Principal repayment as well as Interest repayment as eligible
deductions from your income Principal can be claimed :
·
Up to the maximum of Rs.
150,000 under Section 80C. This is subject to the maximum limit of Rs 150,000
across all 80C investments such as EPF,PPF,Insurance Premiums etc. Before
FY 2014-15 the limit for 80C was 1.5 lakh.
·
Principal Repayment can be
considered as a valid investment under section 80C only if it is made for a
self occupied house or you are not living in the house due to work
·
Interest can be claimed:
·
As a deduction
under Section 24 under
the head Income from house property.
·
You can claim up
to Rs 200,000 or the actual interest repaid whichever is lower. The limit
before FY 2014-15 was 1.5 lakh
·
If the house is
given on rent, there is no restriction on the interest amount.
·
There is no
restriction of Self Occupied Property for claiming the tax break on interest
paid under sec 24.
·
Co-owners and Co Borrowers can
claim deductions in the ratio of ownership.
·
The
certificate issued by the housing loan company, showing the split between
principal and interest for the EMI paid, is required for claiming tax benefits.
What are other deductions available
on your taking home?
While buying a house you have to pay stamp duty and
registration charges. You can claim deduction on these expenses under Section
80C of income tax in the respective year
For self-occupied house you cannot claim deduction on
municipal taxes, but for let-out property you can claim deduction for the
municipal taxes also on your income from house property.
What are Tax benefits of Joint Home
loan For One House?
The repayment of principal
amount of the loan can be claimed as a deduction under section 80C up to a
maximum amount of Rs 1.5 lakh individually by each co-owner. Before FY 2014-15 limit
was 1 lakh.
Each co-owner shall be
entitled to the deduction individually on account of interest on borrowed money
up to a maximum amount of Rs. 2 lakh. Before FY 2014-15 limit was
1.5 lakh.
If the house is given on rent, there is no
restriction on the interest amount.
The tax benefits are according to the proportion of a
loan.That is, if the ratio of the loan is 70:30, then a loan of, say, Rs. 50
lakh will be split into Rs. 35 lakh and Rs. 15 lakh and tax benefits on the
interest/principal repaid will also be calculated based on this ratio.
Can you explain it with example?
Suppose Abhi Sharma(income of 6 lakh) and Nita Sharma
(income of 4 lakh) have taken a home loan of 20 lakh with 10% interest Rate for
20 years for which EMI is Rs 19,300. For the first year Principal payment is
33,905 and interest payment is Rs 1,98,510. Tax
Calculation for the three different scenarios is given below.
Tax Calculation for Abhi
|
||||
Particulars
|
With individual loan
|
Without home loan
|
70% year 1
|
|
Gross
Income
|
6
lakh
|
6
lakh
|
6
lakh
|
|
Less:
Housing Loan interest
|
Sec
24
|
-1.5
lakh
|
Nil
|
-1.39
lakh
|
Total
income
|
4.5L
|
6
lakh
|
4.6L
|
|
Less:
Principal repayment
|
-33,
095
|
Nil
|
-23,
167
|
|
Taxable
Income
|
4.2
lakh
|
6
lakh
|
4.4
lakh
|
|
Tax calculation for Mrs Sharma
Tax Calculation for Nita
|
||||
Particulars
|
With individual loan
|
Without home loan
|
30% split(Joint home loan)
|
|
Gross
Income
|
4
lakh
|
4
lakh
|
4
lakh
|
|
Less:
Housing Loan interest
|
Sec
24
|
-1.5 lakh
|
Nil
|
-59,
553
|
2.5 lakh
|
4 lakh
|
3.4
lakh
|
||
Less:
Principal repayment
|
-33,
095
|
Nil
|
-9,
929
|
|
Taxable
Income
|
2.17
lakh
|
4
lakh
|
3.3
lakh
|
|
To get the best out of the tax savings as seen with
the above example, it is good to let the partner with the higher pay make a
higher contribution towards the home loan resulting in a better tax benefit
collectively.