Joint home loan hacks: Couples can save up to Rs 7 lakh in taxes yearly with this — here’s how

Joint home loans are gaining popularity among Indian couples not just for shared homeownership, but also as a powerful tax-saving tool. Home ownership represents more than just a dream or a milestone; it is a lasting financial obligation that cultivates the growth of wealth and provides security. Investing in a house is a substantial financial decision, but couples can enhance their financial plan by choosing to apply for a joint home loan, according to CA Niyati Shah, Vertical Head - Personal Tax at 1 Finance.

What is joint home loan?

A joint home loan, usually taken by spouses, offers several key advantages. It boosts loan eligibility by combining incomes, allows shared EMI responsibility for smoother finances, and provides significant tax benefits as both borrowers can claim deductions. Women borrowers may also enjoy lower interest rates and reduced stamp duty in some states, making the deal even more cost-effective.

Tax benefits

Shah highlighted that when both co-applicants are also co-owners of the property and contribute towards loan repayment, they are each eligible to claim deductions on both interest and principal repayment. “Each co-applicant can claim up to Rs 2 lakh annually on interest payments under Section 24(b), and up to Rs 1.5 lakh under Section 80C for principal repayment. Together, this can amount to a total tax deduction of up to Rs 7 lakh annually,” she explained.

Deduction on Principal Repayment (Section 80C): Each borrower has the opportunity to claim up to Rs 1.5 lakh annually on the principal repaid, regardless of whether the property is self-occupied or rented, as long as the loan is obtained from a recognised lender.

Deduction on Interest Payment (Section 24B): In the case of self-occupied properties, each co-borrower can claim up to Rs 2 lakh on interest paid. For rented properties, there is no limit on interest deduction, but the offset against other income is capped at Rs 2 lakh.

Combined Tax Benefits: When combined, a couple can claim a total tax deduction of up to Rs 7 lakh per year, with each individual being able to claim Rs 3.5 lakh through Sections 80C and 24B, respectively.

Joint home benefits

This joint structure also boosts loan eligibility, as banks consider the combined income of the applicants. It allows couples to access higher loan amounts, which can be particularly useful in metro cities where real estate prices are steep.

For dual-income households, Shah said the move offers a double advantage. “It not only results in significant yearly tax savings but also promotes long-term financial collaboration between partners,” she said. She also noted that first-time homebuyers may be entitled to additional benefits under Section 80EE or 80EEA, provided they meet the conditions specified under these provisions.

“In today’s dynamic financial landscape, a joint home loan is more than just a tax-saving tool — it’s a smart, future-focused approach to wealth creation, financial equality, and shared success,” Shah added.

Things to note on joint home loans

> Joint home loans are permitted only where the property funded by the loan is also held jointly

Banks and housing finance institutions allow joint home loans only if all loan applicants are also co-owners of the property being financed. This ensures that each borrower has a legal stake in the asset for which the loan is taken. For example, a husband and wife can take a joint loan if both their names are included in the sale deed or property registration documents. 

> EMIs to repay the loan should be made by the joint holders

Each co-applicant in a joint home loan is considered equally responsible for repaying the loan. This means the equated monthly installments (EMIs) must be serviced collectively by the joint holders. While one person can choose to pay the entire EMI, lenders expect all holders to be equally liable. In case of a default, the lender can recover the full EMI from any or all of the joint borrowers, irrespective of their individual contributions.

> Joint holders are eligible to individually claim tax benefits for repayments

Under the Income Tax Act, each co-borrower in a joint home loan can claim tax deductions separately based on their actual contribution towards the loan repayment:

Up to Rs 2 lakh per year under Section 24(b) for interest paid

Up to Rs 1.5 lakh per year under Section 80C for principal repayment
However, this is allowed only if the person claiming the benefit is also a co-owner and co-borrower, and has actually paid the amount being claimed.

> A simple documentation of proportionate holding between joint holders can be made, and EMIs paid in that proportion
To streamline EMI contributions and tax claims, joint borrowers can prepare a written agreement or declaration indicating the percentage of ownership in the property (e.g., 50:50 or 60:40) and the intended share of EMI repayments. 

> Repayment of loan can be in any proportion as agreed between joint holders, not necessarily identical to the proportional holding in the property itself
While property ownership might be divided equally (say 50:50), the EMI contribution can differ, depending on mutual understanding. For example, if one co-borrower earns more, they may choose to pay 70% of the EMI, even if both hold an equal share in the property. This arrangement should ideally be documented, especially if both borrowers wish to claim tax benefits in proportion to their contributions.

> The EMI should be paid from the bank account in which one of the joint holders is the first holder

For ease of tracking, tax documentation, and banking procedures, it is advised that EMIs be routed from an account where one of the joint borrowers is the primary holder. This avoids complications in identifying the actual contributor and helps in smooth processing of tax claims. It is not necessary for both holders to operate a joint bank account, but EMI payments should clearly establish the connection with a loan applicant.