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Tax Benefits of Joint Home Loans for Couples

Are you planning to buy an apartment jointly with your spouse? If so, this is for you. Let’s see how a joint home loan can double tax savings for couples.

If both spouses are co-owners and co-borrowers, they can each claim up to ₹2 lakh in home loan interest deductions, thereby increasing overall tax benefits. For example, Hyderabad-based Satyaprasad and Jyothi purchased a flat with an annual home loan interest of ₹3 lakh. If Satyaprasad alone had taken the loan, he could claim only ₹2 lakh under Section 24(b), losing the tax benefit on the remaining ₹1 lakh. Instead, they opted for joint ownership and equal EMIs, splitting the interest at ₹1.5 lakh each. This allowed both to claim deductions within the ₹2 lakh limit, reducing their combined taxable income by ₹3 lakh.

If only one person had claimed the deduction, the tax saving would have been ₹60,000. By claiming jointly, they increased the savings to ₹90,000. Section 24(b) allows a maximum deduction of ₹2 lakh per individual for interest on a self-occupied property under the old tax regime. Even if the interest paid is higher, a single owner’s deduction is capped at ₹2 lakh. However, when there are two co-owners who are also co-borrowers, both paying EMIs and residing in the property, each is eligible for the ₹2 lakh deduction, allowing a combined claim of up to ₹4 lakh.

For instance, if the total annual interest is ₹4 lakh and both owners fall under the 30% tax bracket, a single owner could claim only ₹2 lakh, saving ₹1.2 lakh in tax, while bearing the remaining interest entirely. This would result in a post-tax interest cost of ₹3.4 lakh. In contrast, if the loan is taken jointly in a 50:50 ratio, both owners can claim ₹2 lakh each, leading to total tax savings of ₹1.2 lakh and reducing the post-tax interest cost to ₹2.8 lakh.

If EMI payments are split in a 60:40 ratio, interest allocation follows the same proportion. The person paying 60% would have an interest share of ₹2.4 lakh but can claim only ₹2 lakh due to the Section 24(b) limit. The other person, with a ₹1.6 lakh interest share, can claim it fully. The total deduction in this case would be ₹3.6 lakh. Hence, taking a joint home loan allows spouses to maximise tax benefits.