Tax benefits
Under Section 80C of Income Tax Act, a home loan borrower is eligible for a tax benefit of principal repayment of up to Rs 1 lakh. A further Rs 1.5 lakh of interest payment is allowed as a deduction under Section 24.
If there are two applicants, this interest payment limit is applicable individually. That means the total deduction works out to a maximum Rs 3 lakh. In such a case, both must be co-owners, not just co-applicants.
In the case of a joint home loan, both the applicants are eligible to enjoy these benefits proportionate to the extent of contribution towards repayment.
Each borrower has to obtain the statement of payment made to the financier individually and submit the same separately in order to avail of the tax exemptions.
Since both share the tax benefits, they are also liable to repay the loan amount. If one of the borrowers fails to make his/her share of the payment, the responsibility of footing the equated monthly installment, or EMI, automatically falls on the shoulders of the other borrower.
In cases where one co-owner is not earning, then the earning partner has to enter into a legal agreement with the former to state that the entire burden of the home loan is being borne by the earning member.
Who can be a co-applicant?
