Joint home loan tax benefits explained: Who can claim interest, principal and HRA?

Joint home loan tax benefits

• Both spouses can claim home loan tax benefits as co-owners and co-borrowers.
• Deductions for interest and principal apply under the old tax regime only.
• HRA can be claimed if rent is paid for a property not owned by the claimant.

Did our AI summary help?

Couples taking a joint home loan often have questions about who can claim tax benefits and how deductions are split. Today's Ask Wallet Wise query decodes how income tax rules apply to interest, principal repayment and HRA when both spouses are co-owners and co-borrowers.

Ask Wallet-Wise initiative offers expert advice on matters related to personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address.

My husband and I are both salaried employees. If we take a joint home loan and buy an apartment that we will jointly own, can both of us avail tax benefits on principal repayment as well as interest on the joint home loan? If the property is self-occupied, can I also pay rent for another property in the same city and claim HRA?

Expert's Advice: If you and your husband are co-owners of the property and also co-borrowers of the home loan, both of you can avail tax benefits on the home loan repayments and interest payments in proportion to your respective shares in the loan.

Each of you can separately claim a deduction for interest paid on the home loan under Section 24(b), up to a maximum of Rs 2 lakh each if the property is self-occupied. In addition, a deduction of up to Rs 1.50 lakh each can be claimed under Section 80C for the principal amount repaid.

You can also claim HRA exemption if you are actually paying rent to live in a house that does not belong to you. The city in which the rented house is located does not affect your eligibility for HRA exemption.

However, you must be able to prove that you are genuinely paying rent for a property owned by someone else and that you occupy it for residence. In practice, it may be difficult to treat one self-owned house as self-occupied while simultaneously claiming HRA for another rented house in the same city unless there is a genuine reason.

Please note that deductions for HRA, interest on a self-occupied property under Section 24(b), and principal repayment under Section 80C are available only under the old tax regime. These benefits are not available if you opt for the new tax regime.

If the property is let out, full interest on the home loan can be claimed. However, the loss under the head “Income from House Property” that can be set off against other income is restricted to Rs 2 lakh per year, with the unabsorbed loss allowed to be carried forward for up to eight assessment years to be set off against income from house property in those years.

Under the new tax regime, for a let-out property, you can claim a deduction for interest on the home loan only to the extent of the taxable rental income.

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 decision.