How a Joint Home Loan Can Boost Your Eligibility and Double Tax Savings

The primary benefit of a joint home loan is the immediate boost it gives to your borrowing power. Lenders assess your eligibility based on your combined income, instantly opening the door to a higher loan amount.

1. Increased Loan Eligibility
Lenders calculate the loan amount you can afford based on your total monthly income. When two incomes are considered, your total borrowing capacity increases significantly.

 
• Example: If your maximum loan eligibility is ₹50 Lakhs based on your salary alone, adding a spouse with a similar income can push your combined eligibility to ₹85 Lakhs to ₹1 Crore. This means you don’t have to compromise on the size or location of your dream home due to financial constraints.

2. Shared Financial Responsibility
A joint loan means the repayment obligation is shared. Both applicants are equally liable for the loan repayment, which reduces the burden on any single individual.

 
• The Benefit: If one borrower faces a financial setback (like job loss or business downturn), the other borrower’s income can keep the EMIs on track, ensuring a perfect repayment history and protecting the credit scores of both individuals. This shared liability ensures that the loan remains manageable over the entire tenure.

3. Concessional Interest Rates for Women
In India, many banks and housing finance companies offer a fractional concession on the interest rate (often 0.05% or more) if a woman is included as a co-applicant and co-owner of the property. This small reduction in the interest rate can result in significant savings over the 15-20 year tenure of the loan.

This is where a joint home loan truly shines as a tax-saving tool, allowing the household to claim deductions that are impossible for a single borrower.

1. Deduction on Interest Paid (Section 24(b))
Under Section 24(b) of the Income Tax Act, an individual can claim a maximum deduction of ₹2,00,000 on the interest paid towards a self-occupied home loan per financial year.

 
• Joint Loan Advantage: In a joint home loan, each co-borrower who is also a co-owner and contributes to the EMI can claim this deduction individually.

 

• The Total Saving: If the annual interest paid is ₹4,00,000, both borrowers can claim ₹2,00,000 each, leading to a combined deduction of up to ₹4,00,000 on the interest component. This significantly reduces the total taxable income of the family.

2. Deduction on Principal Repayment (Section 80C)
Section 80C allows a deduction of up to ₹1,50,000 on the principal amount repaid.

 
• Joint Loan Advantage: Similar to interest, both co-borrowers can claim this deduction individually, provided they contribute to the repayment.

 

• The Total Saving: This allows the family to collectively claim up to ₹3,00,000 (₹1.5 lakh each) per year on the principal repayment, stamp duty, and registration charges (within the overall Section 80C limit).

The Grand Total:
With the maximum limit, a family can save on a total deduction of up to ₹7,00,000 (₹4 Lakhs under 24(b) + ₹3 Lakhs under 80C) every year, making homeownership a highly tax-efficient investment.

To successfully claim the dual tax benefits, you must satisfy three non-negotiable legal conditions. Missing any of these can lead to the tax claim being disallowed.

1. Co-Owner Status is Mandatory
To claim any tax benefits on a home loan, the co-applicant must also be a co-owner of the property as per the property documents (sale deed). A person who is merely a co-borrower but not a co-owner cannot claim the tax deduction.

2. Co-Borrower Status is Mandatory
Both individuals must be formally listed as co-borrowers on the loan agreement issued by the lender. If one spouse is an owner but not a co-borrower, they are not eligible for the deductions.

3. Proportionate Financial Contribution
The most critical condition is that both borrowers must contribute to the EMI repayment from their own taxable income. The share of the tax deduction (e.g., 50:50 or 60:40) must align with the proportion of their contribution to the EMI.

 
• Actionable Step: To maintain a clear record, the EMI should ideally be paid from a joint account where both incomes are regularly deposited, or each borrower should pay their designated share directly from their separate bank accounts.

While the benefits are clear, a joint home loan is a legal arrangement that requires careful consideration.

1. The Credit Score Impact
Both applicants’ credit scores are checked, and the lowest score is often used by the lender to assess risk. If one applicant has a low score, it can negatively impact the interest rate or even lead to rejection. Before applying, ensure both individuals have a healthy credit score (ideally 750+).

2. Legal Liability
Both co-borrowers are equally and jointly responsible for the full repayment of the loan, regardless of their ownership share or contribution ratio. If one borrower defaults, the lender has the legal right to recover the entire outstanding amount from the other borrower. This is a crucial liability to understand, similar to the joint liability on any major financing like a Business Loan.

3. Future Borrowing Capacity
Adding a co-applicant means their financial bandwidth is also utilized. If your spouse is a co-borrower on your home loan, their future eligibility for other loans (e.g., a small business loan to start their own venture) will be reduced due to the existing EMI burden. Only opt for a joint loan if the benefits of a larger loan amount and double tax savings outweigh the utilization of the co-applicant’s credit bandwidth.

For a joint home loan, maintaining impeccable documentation is essential for a smooth ITR filing.

1. Required Documents

 
• Interest Certificate: The lender must issue an annual certificate showing the principal and interest paid during the financial year. This certificate should ideally reflect the proportional division of the repayment if the ratio is not 50:50.

 

• Repayment Proof: Bank statements showing the separate contributions made by each borrower.

2. Filing Separate Returns
Each co-borrower must file their Income Tax Return (ITR) separately. They must claim their respective share of the deductions under Section 80C and Section 24(b).

3. Utilizing LAP for Down Payment
Entrepreneurs who already own a property might use a Loan Against Property on that property to finance the down payment for a second, jointly-owned home. This complex financial structure requires professional tax advice but shows the strategic use of assets and debt.

A joint home loan is a powerful strategy that is perfectly tailored for the modern Indian family. It provides an immediate and substantial boost to your loan eligibility, ensuring you can afford the home you truly desire. More importantly, by enabling both co-owners to claim tax benefits individually, it offers the opportunity to save up to ₹7 Lakhs annually on taxes.

However, this decision must be rooted in clarity and trust. By ensuring both partners are co-owners, co-borrowers, and contribute proportionately to the EMI, you transform a shared dream into a smart, financially optimized reality. With transparent financing options, Credit Saison India encourages you to explore how leveraging shared financial strength can secure your homeownership goal.