Income tax returns filing: Become a co-owner of a house, get these big home loan tax benefits

It would not be wrong to say that everyone of us dreams of having our own house. However, lack of requisite money leaves us with no option but to opt for a bank loan. Getting a home loan from bank is stated to be easy now, but it involves certain criteria like showing your monthly income, your capability to repay debt and your current assets to avail it. If you fulfill the bank's criteria, your home loan process moves towards the next step. The real difficulty arises when you fall short of the eligibility. Many banks are currently providing home loan interest rates in the range of 8.30% to 12% for various categories.

Archit Gupta, Founder and CEO - ClearTax said, "Being able to own a house of your own is dream come true. The government is also sensitive to these aspirations of taxpayers and to make them a reality, it provides certain tax benefits in this regard. Further, co-ownership, these days, is quite common. Co-ownership is where more than one person owns the house and such owners are referred to as co-owners." 

Gupta adds, "Being co-owners of a house property raises doubts as regards which co-owner will the tax benefits be available to, how much of benefit can be claimed, for how long can the benefits be claimed, etc."

To address these issues ClearTax brings in list of factors. 

Prerequisites to be able to claim tax benefits on property

Prior to being able to claim tax benefits on home loan you must ensure that the following conditions are met:

You should be a co-owner in the property: Taking a loan in joint name does not make the borrowers co-owners. Therefore, it must be ensured that for you to become a co-owner your name must be registered on the purchase agreement. If you are not a co-owner, it will not be possible to claim the tax benefits of a co-owner.

You must be a co-borrower for the loan: Apart from being an owner, you must also be an applicant as per the loan documents. Owners who are not borrowers and do not contribute to the EMI will not be able to claim the tax benefits.

Construction of the property must be complete: You may either choose to invest in a pre-constructed property or construct your own property. If you choose to avail the tax benefits on a house property which you wish to construct then the deduction can only be claimed starting from the financial year in which construction of the property is complete. Tax benefits are not available for a property whose construction is yet to be completed. However, do note that the interest portion of the EMI you pay prior to completion of construction can be claimed in five equal instalments starting the year in which construction is complete referred to as pre-construction interest.

Tax benefits available to co-owners

Once the aforesaid requirements have been met, the co-owners will be entitled to the following tax benefits

Exemption on principal payment: Under the provisions of section 80C, a deduction on the principal repayment of home loan can be claimed for upto Rs 1,50,000 from your gross total income. Where there are co-owners of a house property, each co-owner is entitled to a deduction of Rs 1,50,000 for principal repayment.

Claiming deduction on stamp duty and registration charges: Under the ambit of section 80C the co-owners can also claim a deduction on the stamp duty and registration charges they have paid for. It is important to keep in mind that since this deduction is provided for under section 80C, the total deduction under this section cannot exceed Rs.1,50,000.

Interest exemption: The co-owners can claim a deduction on the home loan interest from house property income upto a maximum amount of Rs 2,00,000 each. The limit of Rs. 2,00,000 is applicable for self occupied houses. However, at the time of claiming the deduction you must keep in mind that the total deduction claimed cannot exceed the total interest paid.

Keeping the above points in mind, investing in a house as a family has more tax saving benefits. So be smart and save taxes!!