Tax Benefits on Home Loans for Two Persons: A Comprehensive Guide

When two individuals co-own a property and take out a home loan together, they can avail themselves of significant tax benefits. This guide provides an in-depth look at the tax advantages available in both India and the United States, highlighting the key differences and similarities in tax laws.

Interest Deduction

The most substantial tax benefit for home loan holders is the interest deduction. Both co-owners can claim this deduction, which is particularly advantageous in countries like India and the United States.

India

Under Section 24b of the Income Tax Act, each co-owner can claim up to ?2 lakh (approximately USD 2,700) as a deduction for the interest paid on the home loan, provided that the property is used for self-occupancy. However, there is no upper limit on the deduction if the property is rented out.

United States

In the U.S., individuals can claim a mortgage interest deduction, with a limit of interest on up to $750,000 of mortgage debt for loans taken after December 15, 2017. Each co-owner can benefit from this deduction, provided the loan is in both their names.

Principal Repayment Deduction

While there is no specific deduction for principal repayment, each co-owner can benefit from the principal repayment indirectly. In India, under Section 80C, each co-owner can claim a deduction of up to ?1.5 lakh (approximately USD 20,700) on the principal repayment, but the property must be either completed or under construction. In the U.S., the principal repayment increases equity in the home, contributing to the overall financial benefits but is not considered a direct tax deduction.

Joint Ownership Benefits

In situations where two persons jointly own the property and take the loan together, they can split the deductions based on their share of the loan and ownership. This allows each individual to maximize their tax benefits.

Stamp Duty and Registration Charges

Both co-owners can claim the costs incurred for stamp duty and registration up to ?1.5 lakh (approximately USD 20,700) under Section 80C, provided they jointly own the property. This additional deduction can help in reducing the overall tax burden.

Tax Filing Considerations

It is crucial for co-owners to ensure that they accurately declare their share of income and deductions when filing taxes. This helps avoid discrepancies and potential penalties.

Conclusion

The exact tax benefits available to co-owners of a home loan can vary based on the country's tax laws, the structure of ownership, and the specific loan agreement. It is advisable for co-owners to consult with a tax professional to optimize their tax situation according to their unique circumstances.