Double Delight: How Joint Home Loans Can Help Couples Save Big on Taxes March 11, 2025 by
Introduction of Double Delight: How Joint Home Loans Can Help Couples Save Big on Taxes
Buying a home is a significant milestone, and for couples, it often means combining financial resources to secure a dream property. One of the best ways to optimize finances while purchasing a home is by opting for a joint home loan. Not only does it make homeownership more affordable, but it also offers substantial tax benefits that can lead to major savings.
What is a Joint Home Loan?
A joint home loan is a mortgage taken by two or more individuals, typically spouses, to purchase a property. Both applicants share the responsibility of repayment and ownership, making them eligible for tax deductions under different sections of the Income Tax Act.
Key Tax Benefits of a Joint Home Loan
Taking a joint home loan opens the door to double tax benefits for both borrowers. Here’s how:
1. Tax Deduction on Principal Repayment (Section 80C)
- Each borrower can claim a deduction of up to ?1.5 lakh per year on the principal amount repaid.
- This means a couple can collectively claim ?3 lakh per year, reducing taxable income significantly.
- The property must be self-occupied or rented out for this benefit.
2. Tax Deduction on Interest Payment (Section 24(b))
- Each borrower can claim up to ?2 lakh per year on interest payments for a self-occupied house.
- For a rented-out property, there is no upper limit, but the overall loss from house property set-off against other income is capped at ?2 lakh per year per person.
- Couples can enjoy a combined deduction of ?4 lakh per year on interest payments.
3. Additional Benefits Under Affordable Housing Scheme (Section 80EEA)
- If the property value is within ?45 lakh and the loan was taken between April 2019 and March 2022, an additional ?1.5 lakh deduction on interest is available.
- Both partners can claim this deduction separately, leading to potential savings of ?3 lakh extra per year.
Eligibility Criteria for Claiming Tax Benefits
To maximize tax savings, the following conditions must be met:
- Both applicants must be co-owners of the property.
- Both applicants must be co-borrowers in the loan agreement.
- The home loan must be taken from a recognized financial institution.
- EMIs must be paid from a joint account or in proportion to the ownership.
How Much Can Couples Save on Taxes?
Let’s break it down with an example:
Scenario:
- A couple takes a joint home loan of ?50 lakh at an interest rate of 8% for 20 years.
- The annual interest paid in the initial years is approximately ?4 lakh.
- The principal repaid is around ?3 lakh per year.
Tax Savings:
- Husband’s deductions: ?1.5 lakh (Section 80C) + ?2 lakh (Section 24b) = ?3.5 lakh
- Wife’s deductions: ?1.5 lakh (Section 80C) + ?2 lakh (Section 24b) = ?3.5 lakh
- Total deductions claimed: ?7 lakh per year
- If both partners fall under the 30% tax slab, the savings amount to nearly ?2.1 lakh annually.
Other Advantages of a Joint Home Loan
Beyond tax benefits, joint home loans offer additional advantages:
1. Higher Loan Eligibility
Banks consider the combined income of both applicants, increasing the overall loan eligibility and making it easier to secure a larger loan amount.
2. Lower Interest Rates for Women Borrowers
Many banks offer discounted interest rates (typically 0.05% lower) for women borrowers. If a wife is a co-applicant, the couple can enjoy reduced EMIs.
3. Shared Financial Responsibility
Since both partners contribute to loan repayment, the financial burden is distributed, leading to better household budgeting and long-term financial stability.
4. Higher Probability of Loan Approval
A joint loan reduces risk for lenders, especially if both applicants have stable incomes, improving approval chances.
Things to Consider Before Taking a Joint Home Loan
While joint home loans offer immense benefits, couples should consider:
- Ownership Structure: Ensure both partners are legal co-owners of the property to claim tax benefits.
- Credit Scores: Both applicants’ credit scores matter in loan approval and interest rates.
- Loan Repayment Plan: Plan EMIs strategically to avoid financial strain.
- Exit Strategy: In case of separation or financial issues, have a clear agreement on loan responsibility.
