Home loans help you own the home of your dreams. Additionally, the government lets the borrower claim tax subsidy on both the principal and interest amounts paid. Moreover, you can save extra if you opt for a joint home loan (with two or more borrowers). In the budget for the financial year 2017 – 2018, maximum interest exemption for tax benefit on home loans has been capped at Rupees 2 lakhs including that on the rented property. This basically means that each co-borrower in a joint home loan is eligible for a tax deduction of Rupees 2 lakh for the home loan interest paid by each of them. There are tax subsidies on principal repayments of the home loans too.
Additionally, with schemes like the Prime Minister Awas Yojna (PMAY), the central government is offering 3-4% interest subsidies on home loans from Rupees 9 lakh to Rupees 12 lakh to first-time borrowers. Moreover, since MCLR-linked loans have been launched, most of the banks are arranging to pass on any subsidies by the RBI to the customers. SBI, Axis, ICICI and HDFC banks along with Indiabulls Housing Finance have lowered their home loan interest rates. Thus, it can be said that 2017 is a high-time to take a home loan especially since many government benefits on loans may end by the end of the calendar year. Read on to know how to save more with a joint home loan:
Taking a joint home loan increases the amount limit on the loan as the salaries and financial condition of all the borrowers is considered by the lender while analysing an application. Also, though the co-borrowers take the loan jointly, they can each claim individual tax benefits on the same under Section 80 C and Section 24 B.
Under Section 24 B, co-borrowers can claim tax deductions for home loan interest paid up to Rupees 2 lakhs per year (Rupees 3 lakhs for senior citizens). For example, if there are two co-borrowers then the maximum total tax deduction for them can be up to Rupees 4 lakh.
Additionally, under Section 80 C, each co-borrower is allowed to claim a tax deduction of Rupees 1.5 lakh towards principal repayments (Rupees 2 lakh for senior citizens). For example, if there are two co-borrowers then the maximum total tax deduction under Section 80 C for each of them can be up to Rupees 3 Lakh (subject to actual principal repayment amount).
To explain through an example, let’s consider that an individual takes a loan for Rupees 50 lakhs for 20 years at 10% per annum, then he/she is able to save up to Rupees 2,82,737 in tax deductions. Though, when the same loan is co-borrowed in a 50:50 ratio, the tax benefits increase to Rupees 4,82,737 in an year (subject to all prerequisites being fulfilled). This allows the co-borrowers to save an extra Rupees 2 lakhs in tax deductions in a year.
Moreover, first-time home buyers also get an additional exemption of up to Rupees 50,000/- on interest paid for loans up to Rupee 35 lakhs with cost of home up to Rupees 50 lakhs.
However, you should know that to avail the income tax benefits on a Joint Home loan, the co-borrower of the loan has to be the co-owner of the property. Additionally, you should be aware that being a co-borrower does not automatically makes one a co-owner. Further, undertaking a joint home loan comes with its own terms and conditions as it is dependent on the repayment capacity of each co-borrower. Before sanctioning the loan to the applicants, banks may go through the financial and credit history of each co-borrower. Co-borrowers shall also repay their share of the loan timely and if there is any default by even one co-borrower, it will impact the credit scores of all co-borrowers. Also, if a co-borrower defaults the lender may recover the defaulter’s dues from other co-borrowers. So scan the terms and conditions of the lender of the loan carefully to make an informed decision.
Consequently, a Joint Home Loan helps you to extend your eligible home loan borrowing limit and also save on taxes. It lets you realize the dream of owning the home you desire while letting you share the loan burden with a trusted one. So go on and consider taking a joint home loan if you are a home-seeker in today’s dynamic and buyer-friendly market.
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