BackJoint home loan: EMI repayment options and income tax benefit rules
Joint home loan: The bank will register one ECS for a joint home loan even if there are more than one joint borrowers of the home loan
PremiumI have purchased a residential house in joint ownership with my brother and taking a home loan from a bank. The bank manager says that EMI will have to be paid through ECS from one bank account only. Only one interest and principal repayment certificate will also be issued in joint names. I will transfer my share of the home loan EMI in my brother’s bank account from there full EMI will be paid through ECS to bank. In such situation can we both, the joint owner avail benefit under income tax laws and in what proportion?
Answer: What you are planning to do is perfectly correct and legal. This is how the joint home loans are generally serviced. The bank will register one ECS for a joint home loan even if there are more than one joint borrowers of the home loan. So for borrowers there are two options. Either you open a joint bank account just for servicing the home loan and transfer your respective share in the home loan. Alternatively, one borrower can pay the EMIs from his bank account and the other co borrowers transfer their respective shares in the EMIs to that bank account. So since you will transfer your share in the EMI to bank account of your brother you will be able to claim the tax benefits without any problem.
Though the lender issues a single certificate for payment of interest and repayment of principal amount of a joint home loan mentioning the names of all the co borrowers as the bank would not know the respective shares of the co-borrowers in the home loan. Even if the bank issues a single certificate for a joint home loan EMIs, the co-borrowers can claim the tax benefits in respect of the home loan in the ratio of their respective shares in the home loan provided the co-borrower is also co-owner of the property.
Please note that it is not necessary that the respective shares of the joint owners in the property and in the home loan should be the same. It may vary as one joint owner may fund his share in the property through his own sources whereas the other joint owner funds it through the home loan and under takes to service the home loan by himself alone. In such a situation he alone would be able to claim the tax benefits for the home loan as he alone would be servicing the home loan. Please note that the respective share of joint owners in the property and the home loan get crystalized in the beginning and cannot be changed later on.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.
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