Showing posts with label Joint Home Loan. Show all posts
Showing posts with label Joint Home Loan. Show all posts
Monday 23 December 2019
Wednesday 27 September 2017
Generally all of us think that taking a loan to buy a residential property is not a good idea and so, they start saving some amount from their monthly income into recurring investment or a Systematic Investment Plan (SIP) offered by mutual funds. But the financial planners recommend that for acquiring a house for self use, one should go for a housing loan and pay EMIs in place of going for recurring investment or SIP in other investment product.
Friday 11 December 2015
Download Income Tax Preparation Excel Based Software All in One for West Bengal Govt Employees for Financial Year 2015-16 [ This Excel Utility can prepare at a time Individual Salary Sheet + Individual Salary Structure + Automatic HRA Exemption + Automated Form 16 Part A&B and Form 16 Part B]
Many home loan borrowers consider taking a Joint Home Loan as a practical option to get higher loan amount and also to avail Income Tax Benefits. Joint Debt has become a part of the Household finance these days.
One of the primary benefits of a joint loan is that it increases the borrowing capacity of the prospective home buyers. The combined repaying power of the applicants(two or more) is considered while sanctioning a higher loan amount.
A joint home loan not only allows you to share your debt burden but also allows you to extract maximum benefits offered by the IT Act.
As per the existing Income Tax Laws, both the individuals (loan applicants) can claim income tax deductions on the principal repayment under section 80c and on the interest amount under Section 24. The maximum amount that can be claimed as tax deduction depends on the use of the property ie whether it is a ‘Self occupied property’ or a ‘Let-out property’.
What is a Joint Home Loan? – A joint home loan is a loan which is taken by more than one person.
Who is a co-borrower? – A Co-borrower is a person with whom you take the home loan jointly.
Who is a co-owner? – A Co-Owner is an individual that shares ownership in an asset with another individual / group.
Joint Home Loan & Eligibility rules / Conditions
- Generally a Joint Home Loan can be taken by a maximum of SIX persons (minimum being two applicants).
- A co-borrower (loan applicant) may or may not be the co-owner of the property. But, banks may usually recommend a co-borrower to also be a co-owner of the property. Do note that, being a co-borrower for a house does not automatically make one a co-owner.
- Repayment of a joint home loan is the collective responsibility of both the borrower and co-borrower(s) and each of them is liable for the loan.
- If the loan applicants are married couples then it is a perfect arrangement for home loan providers. The couple is at liberty to decide if they want to be co-owners or if only one of them wants to be a co-borrower.
- If the loan applicants are Father & son or Father & unmarried daughter then Lenders generally insists on the son / daughter being the Primary Owner of the property. (This can be applicable when Mother & unmarried daughter are the borrowers)
- If the loan applicants are ‘brothers’ then banks insists on they being the co-owners of the property.
- Generally, friends or unmarried couples living together are not allowed to take joint housing loans.
Joint Home Loan & Income Tax Benefits
- Section 80c – As per this section, the repayment of principal amount of up to Rs 1.5 Lakh can be claimed as tax deduction by the applicants individually. All the co-borrowers can avail tax benefits. If there are two co-borrowers then the maximum total tax deduction under Section 80c can be up to Rs 3 Lakh (subject to actual principal repayment amount).
Example : Where the husband and wife as co-borrowers are paying a total of Rs 1 Lakh as Principal element of the home loan EMI, each of them can avail tax exemption of Rs 50,000 individually.
- Section 24 – As per this section, the interest payment of up to Rs 2 Lakh (for Self occupied property) can be claimed by the home loan borrowers. If there are two co-borrowers then the maximum total tax deduction under Section 80c can be up to Rs 4 Lakh. (The maximum interest amount that can be claimed as tax deduction u/s 24 is unlimited for a Let-out property).
Example: Where the husband and wife as co-borrowers are paying a total of say Rs 2.5 Lakh as Interest element of the home loan EMI, each of them can avail tax exemption of Rs 1,25,000 individually (assuming the share in the home loan as 50:50)
- Ownership -To avail the income tax benefits on a Joint Home loan, the co-borrower of the loan has to be the co-owner of the property. So, if you are a co-borrower but not a co-owner of your property then you can not avail the income tax benefits. (Co-ownership is mandatory to avail income tax benefits. So, if you and your spouse are co-borrowers for a property owned by another family member then you are not eligible to claim any tax benefits, as you don’t own the property.)
- Ownership Share – The share in tax exemption that each co-borrower gets is in proportion to the ratio of ownership in the property. Therefore, it is advisable for joint owners to procure an ownership sharing agreement stating the ownership proportion on a stamp paper as legal proof of the ownership.
Suggestions
- Highest tax bracket: The tax benefits are applicable in ratio of ownership in the property and therefore the ownership of property should be carefully decided keeping in mind the re-payment capacity of both the borrowers. A co-borrower who is earning well and is in the higher income tax slab rate can opt for higher share in ownership / Loan EMI.
Example : Santosh & Sahya (husband & wife), both are independent salaried individuals. Sahya is in higher income tax slab rate when compared to Santosh. They acquire a home loan of Rs 50 Lakh @ 10% for a tenure of 20 years. The EMI on this home loan is Rs 48,251. As Sahya is in higher tax bracket, they decide to have 60:40 ownership ratio. Sahya wants to pay 60% of the EMI amount to take the maximum benefit of tax savings.
- Liability: All co-borrowers are jointly and severally liable to repay the loan. So, it is prudent to consider entering into an agreement about the splitting of loan liability with other co-borrower(s) to avoid any clashes in future.
- Insurance: It is advisable that all the borrowers should take separate Term insurance plans(better to avoid Mortgage insurance) to mitigate the financial burden on one spouse / co-borrower in case of other’s demise. This way he /she can get the best out of the tax savings.
- Unfortunate Events: In case of divorce or a co-borrower files for insolvency or a co-borrower passes away, it becomes co-borrowers’ responsibility to pay the entire loan. The repayment record of a joint home loan reflects in the credit score of all co-borrowers. So, in the event of any unfortunate incident, it is advisable to identify an alternate co-borrower (if it is not possible to convert a joint home loan to a single loan).
Sunday 8 November 2015
Some
of us think that taking a loan to buy a residential property is not a good idea
and so, they start saving some amount from their monthly income into recurring
investment or a Systematic Investment Plan (SIP) offered by mutual funds.
However, financial planners
recommend that for acquiring a house for self use, one should go for a housing
loan and pay EMIs in place of going for recurring investment or SIP in other
investment product. Let's discuss the benefits of taking a home loan under income tax provisions.
One can get tax benefits through home loan under two different
Sections of Income Tax Act.
a) Under Section 24 - Deduction on interest on home loan for
self-occupied property up to Rs 2 lakh.
b) Under Section 80C - Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh. Let's take an example that Mr. X takes a home loan on which he pays Rs 1 lakh as EMI, i.e. Rs.12 lakh in one year. Out of Rs 12 lakh which he pays every year, Rs 4 lakh goes towards repayment of principal home loan and the remaining Rs 8 lakh towards the interest of the loan.
Tax Benefits under Section 24
and Section 80C: Mr. X is
eligible to claim tax benefits under Section 80C for the principal repayment of
the home loan and under Section 24 for interest components. He can claim
deduction up to Rs 1.5 lakh along with all other permissible instruments like,
life insurance premium, PPF, ELSS, NSC etc under Section 80 C and up to Rs 2
lakh under Section 24. Total deduction will be Rs 3.5 lakh and if Mr. X is in
the highest tax slab, he will get a tax benefit of Rs1,05,000.
Tax Benefits on Joint Home
Loan: One can avail tax benefit
on home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24.
But if you go for a joint home loan along with your spouse in the ratio of 50:
50, then both of you can claim these benefits separately. So the combined limit
will be Rs 3 lakh under Section 80C and 4 lakh under Section 24. This can
reduce your overall cost of loan for the family considerably.
Before going for a joint home loan, you should
mutually work out your ownership share if you wish to optimize the tax benefit.
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.
Saturday 25 April 2015
Download All in One TDS on Salary for Govt and Non Govt Employees for the Financial Year 2015-16 & Ass Yr 2016-17 [ This Excel Utility can prepare at a time your Tax Compute Sheet + Salary Structure +Automatic HRA Calculation + Automatic Arrears Relief Calculation with Form 10E + Form 16 Part A&B and Part B ]
A payee can get tax benefits through home loan under two different Sections of Income Tax Act.
- Under Section 24- Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.
- Under Section 80C- Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh.
- U/s 80EE :- Deduction on interest on home loan up to Rs. 1 lakh ,the deduction can be availed who are get the HBL Int after 01/04/2013 on or after.
Tax benefits under Section 24 and Section 80C and U/s 80EE: Mr.
X is eligible to claim tax benefits under Section 80C for the principal
repayment of the home loan and under Section 24 for interest
components. He can claim deduction up toRs 1.5 lakh along with all other permissible instruments like, life insurance premium, PPF, ELSS, NSC etc under Section 80 C and up to Rs 2 lakh under Section 24.
Another Rs. 1 Lakh U/s 80EE as HBL Interest w.e.f. 01/04/2013.
Tax Benefits on Joint Home Loan: One can avail tax benefit on home loan up to Rs 1.5 lakh under
Section 80C and 2 lakh under Section 24. But if you go for a joint home
loan along with your spouse in the ratio of 50: 50, then both of you
can claim these benefits separately. So the combined limit will beRs 3 lakh under Section 80C and 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably.
Total deduction will be Rs 7 lakh and if both spouses are in the highest tax slab, they will get a tax benefit of Rs 210000/- which is just double compared to an individual home loan, although this provision may vary from person to person.
Before
going for a joint home loan, you should mutually work out your
ownership share if you wish to optimize the tax benefit. 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.
Please
note that it is essential to be co-owners to be eligible for tax
benefits. The co-ownership share also plays a role in determining your
deductions.
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