Many homebuyers co-opt housing loans to increase the tax redemption eligibility. The entire process of repayment of the loan and claiming tax benefits on such loan has to be depleted in an appropriate ratio. Tax regime of India allows certain relaxation with respect to home loans to the applicant, subject to certain terms and conditions.
The benefits of such tax deductions are available under section 24(b) for interest paid under section 80(c) for the principal repayment. Generally, couples choose joint home loan for appreciation of their home loan eligibility. But, before opting for a co-ownership home loan certain basics are needed to be clarified such as- who can claim the home loan benefit, how much tax deduction can be claimed as per joint ownership is concerned.
The co-borrower and the co-owner ado
Section 26 of the Income Tax Act clearly describes the taxation portion of joint ownership properties. The tax share on each behalves is calculated on the basis of property share holding percentage of the claimant. In case, your share of a joint-owned property is certain or uncertain, you can’t be taxed as a Body of Individual (BOI) or Association of persons (AOP).
The basic criteria for claiming tax benefits as a co-owner of the property you need to be co-borrower of the home loan as well. Without filling the bill one can’t claim tax benefits on the borrowed home loan. In most of the cases a person in blood relation or joins another immediate family member such as spouse claim home loan benefits without having any share in the property purchased. These people are not eligible to claim such benefits unless satisfying the aforementioned criteria.
Tax benefit ratio on housing loans
It’s possible being a co-owner and a co-borrower are not servicing the home loan. These people are also not eligible for claiming tax benefits on home loan in respect to the amount you paid during the purchase. For self-occupied properties you can claim tax redemption up to 2 lacs, given the joint owners. For repayment of home loans each co-borrower can claim under section 80C, up to Rs. 1.5 lac yearly, together after satisfying other required criteria. However, the tax benefits on home loan are obtainable as per the ratio in which you are servicing the loan.
Know about your exact share in the home loan and whether it can be modified or not
Property share under co-ownership is determined while purchasing the property. Contribution in down payments and share in home loan also arbitrate the percentage in property share. In case in the agreement of the purchase one of the co-owners name is missing and also is not mentioned in the home loan sanction letter or home loan certificate issued by the lender, the share of such properties are presumed as an equal one, unless there are no circumstances to warrant. It’s advisable to prepare a MoU to clearly define the percentage of property share own by each of the borrowers. Home loan should be serviced in the ration arrived during property purchase. To avoid glitch with the tax authorities co-borrowers shouldn’t do any adjustment in home loan repayment servicing, after being fixed. In case of a cash shortage, other co-borrowers can for the time being lend/gift money, so that the ratio of servicing of the home loan is maintained over the tenure, with respect the share in the home loan.
-Somani Realtors News Network-