joint home loan

7/29/2019 Joint Home Loan

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Tax implication on joint loan:

While purchasing property, you can opt for a joint loan with your spouse. Under the Income Tax

Act, tax benefits are available on home loans and the interest paid on them. In case of joint loans

also, all the co-borrowers can get tax benefits. The maximum limit of Rs.1, 50,000 will apply

individually to both of you (i.e. the total deduction will be limited to Rs.3, 00,000).

It needs to be ensured that both should be co-owners of the property. A co-owner of a house

must be a co-borrower as well. It is essential for a co-borrower to be a co-owner in order to claim

tax benefits. You cannot get tax benefits if you are only a co-borrower and not a co-owner.

Co-borrowers, who are also co-owners, are eligible for the tax rebate in the proportion to their

share in the loan. The repayment capacity of each spouse will be taken into account while

arriving at the share of the loan. The shares of the loan may be in any ratio. The tax benefits

would be shared in that proportion only. You have to specify the share of the property and other

loan details on a stamp paper.

In case a husband and wife pay Rs.2.4lakh as interest and Rs. 100,000 as principal, each has an

equal share in the borrowing, and each can claim Rs. 120,000 towards interest (subject to

maximum of Rs. 150,000) and Rs.50,000 towards principal in their respective income tax returns.

The maximum tax deduction for a single borrower is Rs. 1.5 lakhs. This deduction would apply to

each borrower.

In case one of the co-owners does not have any income, the other co-owner should enter into an

agreement with the spouse. The agreement should state that the entire repayment is met by

only one borrowers income. This would ensure that the main applicant will have 100% beneficial

home ownership, and consequently, he can avail all the tax benefits applicable to a single

borrower.

Each borrower needs a copy of a borrowers certificate. It has to be provided to claim their

respective tax relief. A co-borrower should enter into a simple agreement with the spouse on

stamp paper of Rs.100.

This agreement should basically contain the shares of the ownership along with that of the home

loan availed by the couple.

The borrowers should take two copies of the interest and principal paid certificates from the

bank and each can submit a copy of the certificates along with a copy of the agreement signed

between them.

Yes, 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. If you are only person repaying the

loan, you can claim the entire tax benefit for yourself (provided you are an owner or co-owner).

You should enter into a simple agreement with the other borrowers stating that you will be

repaying the entire loan. If you are paying part of the EMI, you will get tax benefits in the

proportion to your share in the loan.

What is a joint home loan?

A joint home loan is a loan which is taken by more than one person.


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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, a home

loan can have upto 6 co-borrowers. Usually a joint home loan is taken by spouses, or parent and

child. You cannot take a home loan jointly with your friend or colleague or an unmarried

partner. Usually banks insist co-owners to be co-borrowers of the loan. However, the reverse is

not necessary.

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

from only 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 coborrower?

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 parents 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 thepayment 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-applicants 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) Ltd maintains information of all individuals payments relating to loans. It

gives scores to individuals based on their credit history. Irregularity in payment by a partner or co-

applicant can impact your eligibility in the future for a loan.

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.


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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. Its

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. Our articleTax : Income From House

Propertydiscusses it in detail. For An individual

Principal can be claimed :

Up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum limit of Rs

100,000 across all 80C investments such as EPF,PPF,Insurance Premiums etc.

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 underSection 24under the head Income from house proper ty.

You can claim up to Rs 150,000 or the actual interest repaid whichever is lower.

If the house is given on rent, there is no restriction on the interest amount.

There is no restriction ofSelf Occupied Propertyfor 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.
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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 lakh ind iv idual lyby each co-owner.

Each co-owner shall be entitled to the deduction ind iv idual lyon account of interest on borrowed

money up to a maximum amount of Rs. 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.

If I buy a house jointly with my wife and take a joint home loan, Can we both claim income tax

deduction?

Yes, if your wife is working and has a separate source of income, both of you can claim separatedeductions in your income tax returns.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 lakh individually by each co-

owner.

In cases where the house is owned by more than one person and is also self-occupied by each co-

owner, each co-owner shall be entitled to the deduction individually on account of interest on

borrowed money up to a maximum amount of Rs. 1.5 lakh. If the house is given on rent, there is no

restriction on this amount. Both co-owners can claim deductions in the ratio of ownership.

My husband and I have jointly taken a home loan. He pays 75 percent of the EMI. What will beour individual tax benefits?

As you have taken a joint home loan, both of you are eligible for tax exemption for your share of the

EMI paid. For claiming income tax deduction, the EMI amount is divided into the principal and interest

components. The repayment of the principal amount of loan is claimed as a deduction under section

80C of the Income Tax Act up to a maximum amount of Rs 1 lakh individually by each co-owner. The

repayment of the interest portion of the EMI is also allowed as a deduction under section 24 of the

Act. In case you are living in the house for which home loan is taken, both of you shall be entitled to

deduction in the ratio (3:1) on account of principal upto 1 lakh and interest on borrowed money up to a

maximum of Rs. 1.5 lakh individually. If the house is given on rent, there is no restriction on thisamount and both co-owners can claim deduction on interest in the ratio of ownership, 3:1 in your

case.

I have a home loan in which I am a co-applicant. However, the total EMI amount is paid by me.

What is the total income tax exemption that I can avail of ?

Yes, 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. If you are only person repaying the loan,

you can claim the entire tax benefit for yourself. You should enter into a simple agreement with the

other borrowers stating that you will be repaying the entire loan. If you are paying part of the EMI, you

will get tax benefits in the proportion to your share in the loan.


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Quite often it becomes a practical option to avail a joint home loan so as to increase the loanamount and get tax benefits too.

In case a couple plans to buy a home by taking a joint home loan then there are addedadvantages that they can avail from the loan. While a joint loan permits the total loan amount tobe higher by combining the repaying power of the both the applicants, it also provides tax rebate

on taxable income of both. Both the individuals can now claim tax rebate on the principal (UnderSection 80C) and the interest (Under Section 24) that is repaid by them.

Here are some of the direct implications of a joint home loan:

1. As per the Income Tax Act provisions, in case of joint loans, all the co-borrowers can

avail tax benefits. The maximum stipulated limit ofRs. 150,000 is applicable individually

to both the borrowers (which imply that the total deduction possible will be limited

to Rs. 300,000).

2. In order to avail the tax benefits through this provision the co-borrower of the loan also

has to be the co-owner of the property.

3. The share in tax exemption that each co-borrower gets is in proportion to the share in the

home loan availed by the co-borrower.

4. Where the husband and wife as co-borrowers are paying a total ofRs. 240,000 as

interest and Rs. 100,000 as principal element of the home loan, each of them is entitled to

a tax exemption ofRs. 120,000 on the interest part subject to a maximum ofRs. 150,000,

and Rs. 50,000 each for the principal element irrespective of their overall tax returns for

the year.

5. In cases where one co-owner is not earning then the earning partner has to enter into a

legal agreement with the former to state that the entire burden of the home loan is being

borne by the earning member. This will make the earning member to take full advantageof all tax exemptions available on the home loan. This agreement can be signed

on Rs. 100 stamp paper.

6. Each borrower has to obtain the statement of payment made to the financier individually

and submit the same separately in order to avail the tax exemptions.

As is evident from the above implications the tax benefits can be doubled by availing a joint

home loan when buying house. There is no upper limit for tax exemption on the interest amount

paid except that each co-borrower can claim rebate of up to Rs. 150,000 only in any financial

years. In certain cases where there are more number of co-borrowers such as other family

members in a home loan the actual tax rebate availed towards payment of the interest element

can be further increased.

There are certain restrictions on joint loan applications such as sisters, friends and unmarried

couples cannot apply or benefit from this scheme. A maximum of 4 to 6 joint applicants are

eligible for tax rebate under this clause.

Thus, availing a joint home loan is certainly a lucrative financial option to buy a house as well as

save maximum possible on income taxes.

Disclaimer: All information in this article has been provided by BankBazaar.com and NDTV Profit

is not responsible for the accuracy and completeness of the same.

Between a co-owner and co-applicant


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Often the terms co-signer , co-borrower and co-applicant are used interchangeably. There lies a thin

line that distinguishes a co-applicant from a coowner . Housing finance companies and banks insist

that all co-owners be co-applicants to the home loan. But the reverse need not always be true. All co-

applicants need not necessarily be co-owners .

Co-applicant is a person who applies along with the borrower for a loan. A coborrower along with the

primary borrower accepts responsibility for repaying a debt. Since co-owners of a property shouldnecessarily be co-applicants , one can include spouse as a co-applicant for a loan.

In most cases, only your immediate relative is considered for a joint loan application like a parent or

even brother in some cases. Usually, husband-wife , father-son or mother-son apply for a joint loan.

Banks do not encourage friends or distant relative as a co-applicant for a home loan. A coapplicant

becomes equally liable for repayment of the loan amount in case of default by the primary applicant .

Mahesh plans to purchase a house for thirty lakhs in his wife's name. Since his spouse does not earn,

Mahesh has to make loan repayments from his salary. Will he be eligible for tax benefits as monthly

EMI repayments will be deducted from his bank account?

In the first place both Mahesh and his wife have to be co-applicants for the loan. If Mahesh is neither

the owner nor the co-owner of the apartment, he will not be entitled for any tax benefits on the loan

repayments . If Mahesh's wife were employed then tax benefits for loan repayments are split in theratio of the share in the home loan.

A co-applicant who is not a co-owner is not entitled to tax benefits on home loans. An IT certificate will

be issued in the name of both applicant and co applicant at the end of a financial year. Depending on

their share of contribution towards loan repayment, the co-borrowers can claim tax benefits.

Assume the borrower draws insufficient income or bears a poor repayment record. In such

unfavorable circumstances, a co-borrower's involvement is a blessing for the loan applicant. Not only

is the bank assured of timely loan repayment, the process of loan disbursement moves without major

hiccups.

Home loan borrowers are sanctioned anything from as little as two lakhs to as much as 85 percent of

the cost an expensive property in a posh locality. Factors like your job, income, stability, and duration

of employment, age, qualification, savings, assets, current liabilities and loan repayment historydetermine your creditworthiness . Increase your loan eligibility by simply adding your earning spouse

or parent as a co-applicant .

Liabilities of a co-applicant vary from one bank/HFC to another. Before signing on the dotted line, it

worthwhile to talk with the bank/HFC as well as take legal advice on the liability of the co-applicant .

Be it accidental death of the primary borrower or willful defaulting know your liabilities as a co-

applicant from an expert.

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