Tax Deductions on Joint Home Loan: What’s Allowed and What’s Not

By ankita bose Mar 12, 2025, 17:24 IST

Owning a home is a significant financial milestone, and many individuals opt for a joint Home Loan to share the financial responsibility and enhance their loan eligibility. A joint Home Loan allows co-borrowers, usually family members, to jointly apply for a loan and avail tax benefits under the Income Tax Act. However, understanding what deductions are allowed and what are not is crucial for effective tax planning.

Tax Benefits on a Joint Home Loan

A joint Home Loan offers tax benefits to co-borrowers, provided they meet certain conditions. The tax deductions are available under two key sections of the Income Tax Act:

1. Deduction on Principal Repayment (Section 80C)

Each co-borrower can claim a deduction of up to Rs. 1.5 lakh per financial year on the principal repayment of the Home Loan. However, to be eligible for this deduction, the co-borrower must also be a co-owner of the property. The deduction is available on a proportionate basis based on each borrower’s contribution towards the repayment.

2. Deduction on Interest Payment (Section 24(b))

Under this section, each co-borrower can claim a deduction of up to Rs. 2 lakh per financial year on the interest paid towards the Home Loan, provided the property is self-occupied. If the property is let out, there is no upper limit on the interest deduction. Similar to Section 80C, the borrower must be both a co-borrower and a co-owner to avail of this benefit. The deductions are shared based on the respective repayment contributions.

3. Additional Deduction for First-Time Homebuyers (Section 80EE and Section 80EEA)

For first-time homebuyers, additional deductions are available under:

Section 80EE: An additional deduction of up to Rs. 50,000 on interest payments for loans sanctioned between April 1, 2016, and March 31, 2017.
Section 80EEA: An additional deduction of up to Rs. 1.5 lakh on interest paid for loans sanctioned between April 1, 2019, and March 31, 2022, provided the stamp duty value of the house does not exceed Rs. 45 lakh.

Conditions to Avail Tax Benefits

To claim the deductions on a joint Home Loan, borrowers must ensure:

Both applicants are co-owners of the property: Tax benefits are not available if a co-borrower is not listed as a co-owner.
Loan repayment is done from their respective incomes: Deductions can only be claimed in proportion to the repayment contribution made by each borrower.
Construction of the property is completed: Deductions on interest payments are allowed only after the construction is fully completed. Any interest paid before completion can be claimed in five equal installments starting from the year the property is ready for use.

What’s Not Allowed in Tax Deductions?

While joint Home Loans provide tax benefits, there are certain restrictions:

1. Deductions Are Not Available for Non-Owners

If an individual is only a co-borrower but not a co-owner of the property, they cannot claim any tax benefits. Ownership is a mandatory criterion to avail deductions.

2. No Benefits on Late EMIs

Tax deductions can only be claimed on the actual repayment made in a financial year. If an EMI is missed or paid late, the interest component for that EMI cannot be considered for deduction in that financial year.

3. No Double Benefits on Joint Loans

Each co-borrower can claim tax benefits individually, but the total deduction cannot exceed the amount actually paid towards the principal or interest. For example, if the total interest paid is Rs 3 lakh, the co-borrowers cannot each claim Rs 2 lakh separately; they must divide it based on their contribution.

4. No Tax Benefits for an Under-Construction Property

If the property is still under construction, borrowers cannot claim deductions under Section 80C or Section 24(b). Pre-construction interest can be claimed in five equal installments, starting from the year the construction is completed.

5. No Deductions if Loan is Not From a Recognised Institution

The loan must be taken from a recognised financial institution or a registered housing finance company. Loans taken from friends, family, or unregistered sources do not qualify for tax benefits.

How to Maximise Tax Benefits on a Joint Home Loan?

To optimise tax savings, borrowers should:

Ensure joint ownership of the property: Both applicants must be listed as co-owners in property documents.
Plan EMI contributions wisely: Distribute the loan repayment to maximise deductions for each co-borrower.
Claim pre-construction interest in installments: This can help in availing additional benefits once the property is completed.
Keep proper documentation: Maintain records of EMI payments and loan statements to support claims during tax filing.

Conclusion

Taking a joint Home Loan is a strategic financial decision that not only enhances loan eligibility but also provides substantial tax benefits. However, to fully leverage these advantages, borrowers must ensure compliance with ownership and repayment conditions. Major banks like ICICI Bank offer joint Home Loan options with attractive interest rates, making it easier for individuals to own their dream home while optimising their tax savings. By understanding what is allowed and what is not, borrowers can make informed financial decisions and enjoy the benefits of homeownership with maximum tax efficiency.