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Deduction of interest on home loan in case of joint loan.

ANUJ DATA (PARTNER) (41 Points)

16 September 2016

I am a co-owner in a house with my father. We have taken a joint loan from a bank for the house. Now, I am paying full EMIs of the loan. So can I claim full interest u/s24 (subject to maximum of Rs.2 lacs ofcourse)

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8 Replies

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2015 Points)
Replied 16 September 2016

As you are co-owner (assuming 50% ownership), In that case you are eligible for only 50% of interest paid.

If property is self occupied than maximum 2 lac

If let out than whatever interest paid , can be claim as deduction u/s 24 b

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2015 Points)
Replied 16 September 2016

As you are co-owner (assuming 50% ownership), In that case you are eligible for only 50% of interest paid.

If property is self occupied than maximum 2 lac

If let out than whatever interest paid , can be claim as deduction u/s 24 b

Abhimanyu (CA) (316 Points)
Replied 16 September 2016

Thanks for the query, Anuj,
As stated above deduction is proportionally allowed in accordance with there %age holding in property say if prop. is of 100lacs and 70-30 is holding ratio than interest attributable to his part say 70% of value of property be only allowed not full.
Also you can arrange a joint account loan to pay for the above by simply routing interest payment through your father's account and depositing into his account a cheque on account of gift or loan to father, as you like.
So, finally you can't claim full interest's claim.

Hope it answers your query, if any issue please revert,

Thanks,
Abhimanyu

ANUJ DATA (PARTNER) (41 Points)
Replied 16 September 2016

But since I am paying 100% instalments, and my father is not paying anything. Then won't I be eligible for full interest deduction?

Unnikrishnan B (Branch Manager) (740 Points)
Replied 16 September 2016

Sir, You would be eligible for claiming interest deduction subject to the % of holding and the number of house you own .actually your father would not be able to claim his %as he is not contributing for his share of loan repayment .

CA Neha Agrawal (CA) (825 Points)
Replied 16 September 2016

You can claim full interest deduction on loan as you are paying the entire emi.

Also check who is the primary borrower and whether your father's income was considered while sanctioning loan amount.

If your father is a retired person not earning presently you can justify repaying full emi.

Banks while sanctioning home loan insists on joint borrower many a times the joint borrower is a house wife, where entire interest deduction is given to one person (husband)

Abhimanyu (CA) (316 Points)
Replied 16 September 2016

Thanks for reverting, and Ms. Agarwal for putting in front your righteous views,
The act does not clearly specify this, apparently it has left this blank, however, bare act states,
"Sec.24 Income chargeable under the head 'Income from house property' shall be computed after making the following deductions, namely:—
(b)
where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within 28[three] years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed [two lakh rupees].

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.—For the purposes of this proviso, the expression 'new loan' means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital."
Thus we see that act has not specified provision in relation to jointly held property and joint account loan, although the question at the end is "What is property?" Is it the property as a whole or because the property is jointly held, it is that part of the property for the assessee which is His share in the jointly held property?,
I can't answer this with conformity because law is not that much clear, but my view is as follows,
1. For the assessee property should mean his share in the jointly held property.
2.Since it is a joint loan, liability is of both the co owners to make good of, there share of instalments for there respective right in the joint property.
Now, since only one of the co-owner is paying full installment he is actually paying over and above his obligation as well as right,
and how the lender give certificate of interest repayment schedule of joint account in the name of only one co owner?
BUT, IF SUCH ACCOUNT IS JOINT FOR ONLY NAME SAKE AND ACTUALLY THE LOAN IS TAKEN BY ONE PERSON ONLY THAN IN FACT IT IS NOT A JOINT BANK ACCOUNT AND ALSO THE PROPERTY IS IN JOINT NAME ONLY FOR A SAKE OF IT, THAN IN FACT IT IS NOT A JOINT PROPERTY TO QUALIFY IN MY ABOVE DESCRIPTION.
Thus, I think your case false under the capital part of the scenario and hence you could possibly claim full EMI interest.

3. If the co-owners are only for the purposes of security etc. as had Neha stated, and not actual partnership or sharing is there in the property, than even jointly held property be called and treated as single owner property for the purpose of tax deduction.
4. My view of such partition is based on the intent of law to provide owners benefit from tax on interest payment for home purchase but such a benefit is at the cost of govt. revenue thus we should apply the law in a moderate manner with keeping in mind that no undue advantage be taken.

Hope you can get an understanding of my stand and you can distinguish your case in between the two options based on the conditions provided.

Please revert for any issue or clarification needed, please pardon for such a lengthy reply,
Thanks,
Abhimanyu

Sandeep Diwan (service) (129 Points)
Replied 22 September 2016

As you mentioned in your query that you are co owner of the said property hence you can claim 50% interest paid i.e your share in that property. In case it is self occupied property than both co owner can claim his share uotio maxuium if 2 lakhs PA.