Claim Tax Rebate on Joint Home Loans Easily with These Tips
India has traditionally been a country with complex family trees wherein a lot of joint families co-existed. Nuclear families, however, have gained prominence in the recent years and continue to grow rapidly.
More and more young professionals have to move from one location to another due to the demands and challenges faced by them on the work front. While relocating to a new city is a natural choice for many of us, buying a residential property is not!
Buying a home in a new city is not only expensive but a challenging demeanour. An easy solution to this problem is sharing the financial burden by opting for a Joint Home Loan. The co-applicants could be two or more earning members that are part of a family (close or extended).
Benefits of Co-Applying for Home Loan
It would not only be a lucrative opportunity to own a dream house in the city of your choice but also avail cheaper housing finance. Always compare the top offers by the leading banks and financial institutions. For example, PNB Home Loans are promoted by Punjab National Bank, who are extending housing finance for over three decades. With a robust network spread across the country, PNB helps its customers avail loans and deposits seamlessly.
The basic objective of a joint Home Loan is to increase the loan eligibility and to decrease the financial burden on a single person, which is ultimately distributed among the co-applicants. This is usually a usual occurrence in families where a son and the father, husband, and a wife, are earning members, and are eligible to contribute for the repayment of a Home Loan.
The Indian government has made it possible for the applicants to avail tax benefits (Co-borrowers should also be the joint owners of the property). The tax slabs and the subsequent tax benefit will get reversed at the start of every financial year as per the provision of the government during the annual budget presentation.
The structure of deductions which can be availed by the co-borrowers is as follows (updated, post Interim Budget 2019):
Maximum of Rs. 1.5 Lakh of principal amount on the deductions and a maximum of Rs. 2 Lakh deductions on the interest.
Apart from the deductions mentioned above, the co-applicants also get a tax-rebate on registration fees, EMIs and stamp duty fees.
To avail the tax benefits, the following documents are required to be submitted to the relevant authorities:
- Legal documentation of ownership share on stamp paper,
- Details of loan disbursement by the bank along with interest certificate,
- House registration certificate
Tips to Claim Income Tax Rebate on Joint Home Loan Efficiently
1. Avail Insurance:
It is also advisable that the co-owners borrowing the loan should avail insurance to take care of any unforeseen emergencies. The insurance will take care of your monthly repayments, and can be availed for thefts, vandalism as well as to safeguard your immediate family from financial burden in an unforeseen situation.
2. The ratio of Loan Opted is important:
Another point worth mentioning is that owners can claim their tax benefit in the exact ratio in which they have availed the loan amount. The ratio of claims could be 60:40, 50:50, etc.
3. Sign a Memorandum of Understanding:
To make sure there is clarity between both co-owners it is advisable that a memorandum of understanding is signed between them (stamped) to clearly define what share one owns to avoid any future conflicts. These MOU will also contain what amount each party will be paying as a monthly EMI.
4. Change in Repayment Structure:
The co-borrowers can change the repayment structure in future due to any unforeseen circumstances where one of the borrowers is unable to fulfil their monthly commitments either due to loss of a job, accident, and other medical emergencies. At that point, it is advisable that the borrower arranges for the temporary cash crunch by borrowing the same additional amount from friends/family to maintain the ratio which is predicted.
5. Additional Information:
Sometimes a situation might arise that the co-borrower is unable to fulfil his commitments over a longer period and you will have to serve the entire amount. In such cases, you will be eligible to claim the entire amount of deductions in your income tax return filings.
A Home Loan that usually runs for almost twenty to twenty-five years on an average and can cost an average buyer lakhs of rupees; thus sharing loan burden can be a welcome relief. The Indian government has made the process of availing such benefit relatively easier, and there is nothing much that any homeowner has to do, but it does come with certain due diligence that is to be followed to maximise the benefits. While filing for the relief make sure all documents are attached and the submission is made on a timely manner by following the timelines laid down by the relevant authorities.
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