Home Loan Tax Exemption for Spouse
Both spouses can claim tax exemptions on a home loan if they meet certain conditions. This can be a significant tax-saving benefit for married couples who have jointly taken a home loan.
Conditions for Claiming Tax Exemption:
- The home loan must be taken jointly by both spouses.
- Both spouses must be co-owners of the property. This means that the property should be registered in the name of both spouses.
- Both spouses should be co-borrowers of the home loan, meaning that they are jointly responsible for repaying the loan.
Tax Benefits Available:
- Section 80C: Both spouses can claim a deduction of up to ₹1.5 lakhs each per financial year on the principal repayment of the home loan.
- Section 24(b): Both spouses can claim a deduction of up to ₹2 lakhs each per financial year on the interest paid on the home loan, provided the property is self-occupied. If the property is rented out, there is no upper limit on the interest deduction.
Example Calculation:
Let's consider an example where Mr. and Mrs. Sharma have jointly taken a home loan and are co-owners of the property. They have paid ₹3 lakhs towards the principal and ₹4 lakhs towards the interest during the financial year.
- Under Section 80C, Mr. Sharma can claim ₹1.5 lakhs and Mrs. Sharma can also claim ₹1.5 lakhs towards principal repayment.
- Under Section 24(b), Mr. Sharma can claim ₹2 lakhs and Mrs. Sharma can also claim ₹2 lakhs towards interest payment.
In total, the couple can claim a combined deduction of ₹7 lakhs (₹3 lakhs under Section 80C and ₹4 lakhs under Section 24(b)).
Key Points to Note:
- The deductions are available only if the loan is taken for the purchase or construction of a residential property.
- The construction of the property must be completed within five years from the end of the financial year in which the loan was taken.
- Interest paid during the pre-construction period can be claimed in five equal installments starting from the year in which the construction is completed.
Conclusion:
By jointly owning a property and taking a home loan together, both spouses can maximize their tax benefits. This can significantly reduce their taxable income and help in efficient tax planning.
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