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Following your expert advice I wish to know that if I have taken a joint home loan with me as the primary applicant and my parents as co-applicants for construction on a piece of land co-owned by my parents only, will I be eligible for availing the tax benefits?

                                                                                                                                                                     -- Angelo

Based on your pooled income, you can opt for a joint construction loan with your parents. Since you are not a co-owner of the property, your parents will have to be co-borrowers to the loan along with you.

However, you will not be able to claim tax deduction benefits on the loan taken. You have to be a co-owner of the property as well as the co-borrower to the loan to be able to claim tax deduction benefits. The only option is to get your name added as a co-owner to the property if you wish to claim tax benefit. This will have stamp-duty implications. Please consult a local lawyer specialising in property matters for detailed advice.

I need some tax advice vis-a-vis my home loan.

Here are the details of my loan:
1. Me and my spouse are joint owners of property and have taken a joint loan
2. The property is under construction and will be completed in January 2010
3. We stay in rented flat in the same city (Hyderabad)
4. We have paid Rs 45,719 as principal and Rs 34,788 as interest in this financial year.

Now my questions are:

1. Can we claim both HRA and Home loan benefit?

2. For the principal amount Rs 45,719, I understand we can include this in our 80C bag of Rs 1 lakh. Question is, can one of us 'use' the whole amount, or can one person claim only Rs 45,719/2 = Rs 22,859?

3. For the interest amount, I have similar question. We have the Rs 1.5 lakh limit.  Can one person claim the Rs 34,788, or do we need to split.

                                                                                                                                                              -- Amit Gupta

1. Claiming tax deduction benefit on home loan and HRA exemption is de-linked. Contrary to popular opinion, there is no restriction under the I-Tax Act with respect to claims for both. A number of salaried consumers take a home loan to acquire a residential property, but do not stay in that property for various reasons. They stay in rented premises for which they pay rent. If they are receiving a house rent allowance from their employer, a question frequently arises-whether they can claim exemption of their HRA based on the rent actually paid by them, as well as the interest payable on the loan taken to acquire the owned property.

The exemption of HRA is covered under Section 10 (13A). Simply speaking, the only conditions for allowing the exemption of HRA are:

a) Rent must actually be paid by the assessee (legal term for the person whose tax liability is being worked out) for the rented premises which he occupies

b) The rented premises must not be owned by him.

c) As long as the rented premises are not owned by the assessee, the exemption of HRA will be available up to the limits specified in the relevant rules. There is no mention here about any effect on the exemption because of ownership of any other property.

Let us now turn to the deduction of interest payable on a home loan. Contrary to popular perception, the interest is not a straight deduction allowed from the salary income. The deduction is actually allowed while calculating the income from house property; although the effect (as we will see below), in the case of self occupied property, is the same as allowing it as direct deduction from salary income.

The relevant sections are Section 22 to Section 27.

a) The point that we must remember is that income can also be negative or in other words, include a calculation of loss.

b) In the case of self-occupied property, the annual value "A" is taken as "nil" (therefore S automatically becomes nil as 30% of 0 is 0) and I is restricted to a maximum of Rs.1, 50, 000. Therefore, in the case of self occupied property; the result of calculation of "income from house property or H will always be a loss to the extent of the interest payable on the home loan or Rs.1, 50, 000 (whichever is lower).

c) There is nothing in the section that affects the exemption of HRA at all. Also, there are no conditions that restrict the availability of deduction of interest based on the assessee's stay in any other premises.

However, you can claim tax deduction benefits on a home loan for an under-construction property only from the financial year in which the construction is completed.

2) Each co-owner who is a co-borrower can claim tax benefit on principal to the extent of Rs. 1 lakh to the extent of their respective shares in the loan.

3) Each co-owner who is a co-borrower can claim tax benefit on interest to the extent of Rs. 1.5 lakh to the extent of their respective shares in the loan.

4) As both of you are co-owners, both will be eligible for the attendant tax benefits in the proportion of your share in the loan. Technically, you can change the share in the flat and hence your share in the loan and also change the tax benefits available to each of you.

Please document the necessary changes so that you do not have any problems in getting your tax benefits. However, any change in the ownership pattern is likely to have stamp duty implications and hence-you should proceed with caution on the change in ownership pattern.

I already have one home for which I'm paying EMI and enjoying tax benefits.

I want to go for new joint home loan with my spouse for a new property. In such scenario, I want my spouse to enjoy the tax benefits in its entirety.  Is this possible? If no, then in what ratio (max) can she avail tax benefit for this joint loan?

                                                                                                                                                        -- Mukhtar Sayed

You can get a joint home loan if your pooled incomes can justify the loan. Each of you can get tax deduction benefits to the extent of your respective shares in the loan if you both are co-borrowers to the loan as well as co-owners to the said property.

You can enter into a share agreement with your spouse which will enable her claim 100 per cent tax deduction benefits. You can get a draft of the agreement on Apnaloan.com.

Got a question for Harsh Roongta? Please write to us!

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

      

Harsh Roongta is CEO apnaloan.com, a guide to home loans in India. Apnaloan also enables consumers get best home loan rates by making banks compete for their loan.

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