Home Loan Income Tax Benefits

Joint applicants, who are also joint owners, are eligible for tax benefits in the proportion of their share in the loan. The interesting part is that both spouses can claim benefits up to the maximum limit.

Let’s say a couple buys a home jointly (each owning 50%) and take a loan for it. If the interest and principal paid for the loan is Rs 3,00,000 and Rs 1,20,000, respectively, each of them can claim Rs 1,50,000 as interest deduction. This is also the maximum amount that an individual can claim.

For the purpose of tax planning, the spouse earning higher income should claim a higher share to maximise his/her tax relief.

Always plan your tax savings only after you take all the loan benefits into account, which are the deduction and the rebate.

All banks and financing institutions usually issue a provisional certificate at the start of the year. This is based on the Equated Monthly Instalments (EMIs) payable in the financial year, with the breakup of the interest and principal to be paid.

This will give you a near accurate idea of how much principal and interest has to be paid in that year. Accordingly, see how this translates into a rebate or interest deduction.

Based on such projections, you can assess your income and plan for other investments – like tax-saving bonds and life insurance – to save tax.

At the end of the year, you will get an original certificate based on the actual home loan EMIs paid for that year. This certificate has to be submitted along with the income tax returns to claim the deduction.