Buying a home is an expensive affair for the large part of the population. It has been made much easier to buy a house today, by availing the benefits of a Home Loan. The Home loan is an easy solution to deal with the financial burden of purchasing a new house. The home loan suffices the primary need of credit which is essential to buy a house. A joint home loan increases the eligibility for availing a loan and also decreases the financial burden on a single person by dividing it among the co-applications of the joint home loan holders.
The Home loan tax benefits which can be claimed by the borrowers of a Home Loan is a lucrative opportunity for buyers to enjoy the benefits of a cheaper housing finance. A joint home loan can help you save tax while you invest for long term security by owning a fixed asset. A home loan gives you the eligibility to enjoy the privilege of tax rebates under the sectional law 80c and 24 of the Income Tax Regulations.
Types of Home loan Tax benefits
The Indian government has given the benefit to joint owners of a property to avail tax benefits on a home loan. There are mainly two types of home loan tax benefits which are available on the repayment of the loan taken for housing purpose.
- Under section 24 of the income tax regulations, a maximum amount of Rs.2 lakh can be deductedfrom the interest paid on the home loan. The property needs to be self-occupied or an ownership property needs to be lying vacant.
- Under section 80c of the income tax regulations, there can be a deduction of maximum Rs.1.50 lakh on the principal amount of the loan.
The tax slabs and the benefits are revised annually during the annual budget presentation as per the government provisions. The above values are updated post the Interim Budget of the year 2019.
Additional Tax Rebates on Home loan
Apart from the above mentioned deductions of the interest amount and principal amount of the home loan, the co-applicants of a home loan can also avail tax rebate on the EMI’s, registration fees and the stamp duty fees.
To avail these tax benefits, the following documents are required for submission to the authorities to provide the benefits to the applicants:
- A legal document in a stamp paper which mentions the ownership of the property
- The details of the loan disbursement and an interest certificate issued by the bank from where the loan was issued.
- A registration certificate of the house
Tips to claim the Tax rebates on a Joint Home Loam
- Avail an insurance
The co-borrowers of a joint home loan should avail an insurance to be able to secure damages which can be incurred due to unforeseen emergencies like vandalism, or thefts. The insurance safeguards not only security of the immediate family but it takes care of the monthly re-payments of the loan in case of unforeseen circumstances leading to extreme financial burden.
- Ratio of loan
The owners can successfully claim the tax benefits in the same ratio in which they have availed the loan. The claims of the ratio can vary from 60:40, 50:50 etc.
- Important to sign the memorandum of understanding
To ensure that there is clarity between the co-owners of a loan it is important to sign a memorandum of understanding. The MOU clearly defines the share of each owner to avoid any kind of conflicts in the future. This memorandum contains the exact amount each party pays as part of the monthly EMI for the home loan.
- Repayment structure
It is very likely that the repayment structure of the loan can change in future due to unforeseen circumstances. One borrower may be unable to fulfil the monthly commitment due to any unfortunate situation like loss of job, an accident, medical emergency or a financial breakdown. It is advisable that in such a situation the borrower should arrange the same additional amount for a temporary cash crunch to maintain the ratio.
- Single borrower can claim full reduction in some cases
In some situations if a co-borrower is unable to fulfil his commitment of serving the entire home loan account and a single individual needs to serve the entire amount, then that individual can successfully claim the entire amount of tax.
A Home Loan usually lasts for around twenty to twenty five years and costs the buyers’ lakhs of rupees. Hence, a joint Home loan reduces the burden of finance to a large extent. The government of India has also initiated tax saving returns on interests and principal amount which makes home loans quite beneficial.
Advantages of a Joint Home loan
Benefit of tax returns
The joint holders of a Home Loan can maximise the tax returns under section 24 and 80 of the income tax regulations. They can get a rebate up to Rs. 1.5 lacs n the principal amount and 2 lakhs on the interest payments of the loan. The tax benefits are applied in proportion to the ratio of the loan taken by the borrowers
Loan eligibility increases
If two people take a joint home loan, the income of both co-owners is considered, hence it gives a higher credit value and allows the sanction of a higher loan amount by the bank. . Alower property registration fees is levied if the loan is taken jointly by two borrowers. A joint home loan by the husband and wife too reduces the succession issues.
Some options: PNB Housing Loan
PNB Housing loan offers very attractive housing loan schemes to people. It is one of the most popular Housing finance schemes which offers a relatively low interest rate starting at just 8.85% up to 10.20% per annum. The PNB Housing Loan also allows the borrowers to change their existing home loan from another insurer to PNB to enjoy much lower EMI. PNB Housing loans also offers flexible repayments option.
L&T Housing Loan
The L&T housing loan offers joint home loans for tenor up to 30 years. They offer attractive interest rates, and there is usually no pre-payment penalty. The L&T Housing Loan offers a quick and easy documentation services with customised solutions for all income group borrowers. The loan amount is available up to Rs.10 crores.