Niyati Shah
Home ownership is more than just a milestone — it’s a long-term financial commitment that fosters wealth creation and security. While purchasing a house is a significant investment, couples can optimise their financial strategy by opting for a joint home loan.
This approach offers not just financial convenience but also unlocks substantial tax benefits. By pooling their resources, couples can also enhance their loan eligibility and improve liquidity.
Why joint home loans make financial sense
A joint home loan involves two or more borrowers — typically spouses. This offers multiple advantages:
Higher loan eligibility: financial institutions assess the combined income of both applicants, which increases their loan eligibility and enables them to purchase a better property.
Shared financial responsibility: both partners can contribute to the EMI, ensuring smoother financial management
Significant tax savings: each co-borrower can claim tax deductions, effectively doubling the benefits.
Additional benefits for women borrowers: many banks offer a 0.05 - 0.1 percent lower interest rate if a woman is the primary borrower. Additionally, some states have lower stamp duty for women buyers, further reducing property acquisition costs.
Also read: Applying for a home loan in India? Here is what NRIs need to know
Tax benefits under sections 80C and 24B
A joint home loan allows couples to claim separate tax deductions, leading to considerable tax savings. The key benefits include:
Deduction of the principal repaid (section 80C)
- Each co-borrower can deduct up to Rs 1.5 lakh of the principal repaid, from his / her taxable income.
- The deduction applies to both self-occupied and rented out properties.
- This deduction is available only if the loan is taken from a recognised financial institution.Deduction on the interest paid (section 24B)
- Each borrower can deduct up to Rs 2 lakh of the interest paid, if the property is self-occupied.
- For rented out properties, the interest paid can be claimed without any upper limit, but the overall loss under the head “Income from house property” that can be set-off against other income is capped at Rs 2 lakh per year.
By utilising both deductions, a couple can collectively claim up to Rs 7 lakh in tax benefits annually (Rs 1.5 lakh + Rs 2 lakh per person).
Also read: Relief for house owners, can claim nil tax on two self-occupied properties now, without conditions
Illustration
Consider Rahul and Anjali, a working couple who have jointly taken a home loan of Rs 80 lakh at an interest of 8 percent for 20 years.
- Annual EMI: approximately Rs 7.73 lakh.
- Principal: Rs 1.8 lakh,
- Interest: Rs 5.93 lakh
Since they are co-borrowers, their tax deductions will be as follows:
| Deduction component | Rahul | Anjali | Total deduction |
| Section 80C (principal) | Rs 1.5 lakh | Rs 1.5 lakh | Rs 3 lakh |
| Section 24B (interest) | Rs 2 lakh | Rs 2 lakh | Rs 4 lakh |
| Total Tax Deduction | Rs 3.5 lakh | Rs 3.5 lakh | Rs 7 lakh |
If both partners fall in the 30 percent tax bracket, their combined annual tax savings could be approximately Rs 2.1 lakh. Over 20 years, this would result in cumulative savings of over Rs 42 lakh, significantly reducing the real cost of home ownership.
Legal and tax considerations
To claim these tax benefits, both partners must:
- Be co-owners of the property (ownership must be explicitly stated in legal documents).
- Be co-borrowers in the loan agreement.
- Actively contribute to EMI payments, as tax deductions apply only to the amounts repaid by each borrower.
Additionally, maintaining proper financial records and ensuring timely payment is essential to avoid tax-related complications.
A smart move
A joint home loan is not just a way to finance your dream condo, it is a smart financial move that enhances affordability, lowers taxes, and ensures shared financial responsibility between partners. It also paves the way for improved financial stability and wealth accumulation.
In an era of rising real estate prices and evolving tax regulations, understanding and utilising these benefits can significantly impact a couple’s financial future.
The author is Vertical Head – Personal Tax, at 1 Finance.
Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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