There could be so many reasons for taxpayers who wish to buy a residential property jointly. In case of the sudden demise of one property holder, the smooth succession of the property to another holder is one of the first benefits when a property is bought and home loan taken jointly.
Moreover, there are tax benefits on home loans for joint owners. To stay entitled to the benefits, make sure that you meet certain conditions as mentioned below:
1. Are you a co-owner of the property? - It is often found that both the parties have taken a home loan, but one partner is not the property owner as per the documents. Make sure that you register your name as a co-owner of the property, so as to qualify for claiming tax benefits for a home loan.
a. In a case where the property is a self-occupied house, a tax benefit of up to ₹ 3.5 lakh is given per financial year for each property owner. Make sure your bank has provided you with an annual housing loan interest certificate to avail the benefits. Once the property construction is completed, tax deductions can be claimed. Construction period to complete the property is five years to make the deduction available. After that, the annual tax deduction amount will decrease from ₹ 2 Lacs to a lesser amount.
b. A let out house under joint ownership is also subjected to tax deductions. Considering each property owner's share in the property, the share is made proportional to the rental income during taxation. In a condition where rental income is lesser than the interest paid, a loss of up to ₹ 2 lakh can be shown by each owner. Claiming an overall deduction of up to ₹ 1.5 lakh per annum on the registration fees, principal repayment of the housing loan, and stamp duty charges by each owner are also allowed.
2. Are you a co-borrower for the property loan? – There have been instances found where the property co-owner doesn't contribute to loan EMI repayment. Being an applicant of the loan is as important as becoming a co-owner of the property to claim tax benefits.
3. Is the construction of the property complete? – Claiming tax benefits is not possible on the under-construction property. Thus, the construction completion factor is mandatory and claiming tax benefits starts from the financial year in which the property construction is complete. The interest which was paid during the development stage of the property is also claimed in five equal instalments. It begins with the financial year in which the property is ready for possession.