ATM :: How to maximise tax benefits on Joint Housing Loan


Preeti Kulkarni, ET Bureau Feb 23, 2013, 07.58PM IST

ATM

(If you and your spouse own…)

MUMBAI: For most tax-payers, the first three months of a calendar year are extremely hectic. In addition to meeting various year-end deadlines at their workplaces, they also scramble to make tax-saving investments before March 31. In the rush to meet this deadline, many forget to take into account tax breaks that they can claim even without making specific investments.

For instance, tax breaks on joint home loans. Now, most home loan borrowers are aware that repayment of principal component entitles them to deduction of up to Rs 1 lakh under section 80C and section 24 allows tax benefits of up to Rs 1.5 lakh on interest paid.

However, not many couples know how to maximise tax breaks on joint home loan. If you belong to the growing tribe of couples who buy properties jointly, you need to know that each of you can claim both these deductions individually, thus optimising your tax savings.

Moreover, you can also mutually work out our ownership share if you wish to optimise the tax breaks. Now, lenders insist on co-owners being co-borrowers in a housing loan, while it is essential for co-borrowers to be co-owners to be eligible for tax benefits. And, the co-ownership share plays a role in determining your deductions.

That is, if you and your spouse own the house jointly in the ratio of 50:50, both can claim deductions in equal proportion. Therefore, if your tax slabs are different, you need to work out your ownership share in a manner that the spouse in the higher tax bracket owns a bigger share.

Finally, however, the decision will boil down to the level of mutual understanding between the couple – if it is good, they can adopt this strategy. Else, a 50:50 arrangement might be a safer bet. Better still, it might be wise to go by the partners’ actual share in the loan taken or EMI paid.

Source : http://goo.gl/Dp4wg

P.S.:

  1. Loan has to be taken on or after 1st April 1999
  2. Loan should not be for Repairs/Renovation/Reconstruction. In such cases deduction of only upto maximum of Rs.30000 every year can be claimed
  3. The deductions are permissible only in respect of one property of the borrower, i.e. if he/she has raised loans for multiple properties, interest can be claimed as deduction only in respect of one property, depending on borrower’s choice.
  4. If property is rented out, interest paid on loan can be fully deducted from the income derived from the property without limit of Rs.150000 or Rs.30000, as the case may be.
  5. Interest on loan taken for commercial property or on loan taken for business/personal needs against the mortgage of property by an individual/HUF/partnership firm/company/any other person can be fully claimed as deduction from income from rent/business/profession/other sources, as the case may be. However, the benefit on account of principal repayment u/s 80C shall not be available in such cases.
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