To enhance the eligibility for a home loan, borrowers often apply for the loan along with a co-borrower, in most cases, the spouse. However, just being a co-borrower does not make that person eligible to claim the tax benefit that comes with home loan repayment. There are various other criteria that have to be met before a co-borrower can claim the tax benefit.
Tax deduction
There are two components of a home loan—principal and interest. Principal repayment qualifies for tax deduction under section 80C of the Income-tax Act, 1961, which has an overall limit of Rs1.5 lakh. Each co-borrower can claim this benefit to the tune of Rs1.5 lakh, but the combined claim cannot increase the total principal repaid during the year.
Interest payment qualifies for deduction under section 24(B), which has an overall limit of Rs2 lakh. Again, all co-borrowers can claim tax deduction for the same from their respective incomes, but the total claim cannot exceed the actual interest paid.
