Tax deduction for a co-borrower who is not a co-owner
Author Name : apnaloan.com
Friday,10th August 2007
My parents own a property, jointly. They live on the ground floor of the house, while I live with my family on the first floor. I want to construct two additional rooms at my house. My parents have agreed to allow construction if I spend money from my resources, and they are willing to give this in writing. They will continue to remain the joint owners of the entire property and I will have no ownership in the property. It is a freehold property. Will I get a home loan, and if yes, would I be able to avail deduction of interest under Section 24 and principal amount paid under Section 80C?
Assuming your declared income is enough to make you eligible for the loan required by you, you should not have difficulty getting a loan to build an extension to the existing house owned by your parents. However, the owners (i.e. your parents) will have to be co-borrowers along with you. Since you are not a co-owner, you will not be eligible for any tax benefits in respect of the loan installments repaid on such a loan. You could explore the option of becoming a co-owner by virtue of a gift deed or sale deed both of which will entail payment of stamp duty. Only after you become a co-owner, will you be able to claim the tax benefits.