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Home loans: Multiply your gains with joint ownership
By Vikas Vasal

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Tax benefits on home loans have turned out to be an important aspect of home buying . Here is how you can benefit from the same.

Tax breaks

For self-occupied house property, the annual value of the house property is considered to be nil. Further, an individual could claim a deduction for the interest paid on the home loan (for purchase or construction) up to Rs 1.5 lakh, subject to certain conditions. This would result in a loss under the head house property of up to Rs 1.5 lakh, which could be set off against other income. If the property is let out, the actual amount of housing loan interest, without limit, could be claimed as deduction. Also, an individual can claim a deduction up to Rs 100,000 for re-payment of the principal amount U/S 80C of the Income Tax Act, 1961.

Joint benefits

This advantage gets multiplied if the property is acquired in a joint name, as each individual is entitled to claim tax benefits. Thus, if a husband and wife have a property with equal share, both are entitled to claim these deductions. There is no restriction as to who the co-owner should be and there is no limit on the number of joint owners. Property can be jointly owned with your spouse, brother or parents.

Here, the following points merit consideration: First, the house should be bought in the joint name and proof of co-ownership should be maintained. Second, the housing loan should also be taken in joint names.

The repayment of loan should preferably be made individually by the co-owners directly, if feasible, or from a joint
bank account in which funds for repayment of loan should be contributed by the co-owners in proportion to their ownership/loan. All the co-owners should have their independent income sources from which the loans are re-paid.

Typically, the tax benefits are available in proportion to the joint ownership and the loan taken by the co-owners.
Additional benefits

Buying a house jointly facilitates a larger loan as income of all the co-owners would be considered by the lenders. Also, in many states, a lower property registration fee is levied in case the property is owned by women either individually or jointly. Further, in case of husband and wife, joint ownership also helps reduce succession issues.

A point to be noted here is that under the proposed Direct Tax Code, these tax benefits are proposed to be restricted. Till then, however, one can enjoy the same.

(The writer is Executive Director, KPMG) 


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