For Indian couples planning to buy a home together, opting for a joint home loan isn’t just a practical financial decision—it’s a powerful tax-saving strategy. More and more couples are turning to joint home loans not only to share ownership but also to maximize tax deductions and boost their overall financial planning.
What Is a Joint Home Loan?
A joint home loan is a type of loan where two or more individuals—typically spouses—apply together to purchase a property. This arrangement comes with several benefits. Firstly, combining incomes increases loan eligibility, allowing couples to access higher loan amounts. Secondly, the burden of monthly EMIs is shared, leading to more manageable finances. Moreover, this setup opens the door to significant tax benefits, particularly when both applicants are co-owners and contribute toward loan repayment. In some states, women borrowers may even enjoy additional perks like lower interest rates and reduced stamp duty.
Tax Benefits of Joint Home Loans
According to CA Niyati Shah, Vertical Head – Personal Tax at 1 Finance, both co-applicants in a joint loan—if they are also co-owners of the property—can individually claim tax deductions on the home loan repayment. Each borrower can claim up to ₹2 lakh per year on interest payments under Section 24(b) and up to ₹1.5 lakh under Section 80C for principal repayment. This adds up to ₹3.5 lakh per person, or ₹7 lakh annually for a couple.
- Section 80C (Principal Repayment): Each borrower can claim up to ₹1.5 lakh annually on the principal paid, irrespective of whether the property is self-occupied or rented, provided the loan is taken from a recognized financial institution.
- Section 24(b) (Interest Repayment): In the case of self-occupied properties, each co-borrower can claim up to ₹2 lakh in interest deduction. If the property is rented out, the entire interest is deductible, although the set-off against other income is capped at ₹2 lakh.
These tax benefits make a joint home loan an effective way for couples to reduce their taxable income significantly.
More Than Just Tax Savings
Beyond tax breaks, joint home loans enhance overall financial flexibility. By taking into account the combined income of both applicants, banks are more willing to approve larger loan amounts—an important factor in cities with high property prices. For dual-income households, this setup promotes shared responsibility and long-term financial synergy. First-time buyers may also be eligible for additional tax benefits under Sections 80EE or 80EEA, depending on specific conditions.
As Shah points out, a joint home loan is not just a fiscal tactic but a modern approach to building wealth, encouraging equality, and fostering financial partnership.
Important Considerations for Joint Home Loans
- Ownership Is Mandatory: Banks allow joint home loans only if all loan applicants are also co-owners of the property. This legal stake must be reflected in the property’s registration documents.
- Joint Responsibility for EMIs: All co-borrowers are equally responsible for repaying the loan. While one person may pay the full EMI, in case of default, lenders can hold any or all co-applicants liable.
- Tax Claims Must Match Contributions: Co-borrowers can claim deductions only for the amounts they actually pay, and they must be both co-owners and co-borrowers to be eligible.
- Documented Ownership and Repayment Shares: It’s advisable for borrowers to document their proportionate ownership (e.g., 50:50 or 60:40) and EMI contribution ratios, even if these don’t match exactly.
- Flexible EMI Contributions: While ownership might be equally divided, repayment can be in any mutually agreed proportion. This flexibility is useful if one partner earns significantly more than the other.
- EMIs Should Be Paid from a Linked Account: Ideally, EMIs should be paid from a bank account where one of the borrowers is the primary holder. This simplifies tax documentation and helps in proving eligibility for deductions.
Conclusion
A joint home loan is more than just a loan—it’s a strategic move toward financial stability, tax efficiency, and shared prosperity. For couples looking to make a smart investment in their future, this could be one of the most rewarding decisions they make.
