Each Joint Holder Contributing To House Purchase Can Claim Benefit On Home Loan Repayment

I had Purchased a flat jointly with my father with a home loan. I have bought another flat jointly with my wife and have again taken a housing loan in March 2023. I am servicing both the home loans. My parents stay in the first flat whereas I stay with my family in the second flat. Can I claim deduction on both the home loans?  

It seems you have fully funded both the flats. In the case of joint holding, if one of the holders has paid 100 per cent of the purchase consideration and the other joint holder is included just for convenience, the person who has paid the entire consideration whether through home loan or by way of down payment is treated as the owner of the property for tax purposes. However, in case the purchase of the joint property has been contributed by each of the joint owner, each co-owner is to be separately assessed in respect of their share in the property.  

Each such joint owner can claim the benefit under Section 24 of the Income-tax Act, 1961 for interest on loans and under Section 80C for capital repayment in the ratio in which the home loan is serviced by each joint owner.  

Since none of the houses are let out, both the houses are to be treated as self-occupied.  

Under the tax laws, a person can have maximum of two houses as self-occupied. So you can claim the tax benefits for repayment of home loan under Section 80C, within the overall limit of Rs. 1.5 lakh along with other eligible items and maximum up to Rs. 2 lakh for interest paid in respect of both the houses taken together.  Any interest beyond the limit of Rs. 2 lakh for both the home loan taken together is not eligible for any tax benefit, but you can certainly add it to your cost of the property for capital gain purposes as and when the same is sold.

My wife is doing full time MBA in India for which I Have taken an education loan from a bank. Will this help me reduce my tax liability?  

One can claim deduction for interest paid on education loan on taken by the student, spouse and children, from a bank, a notified financial institution, or any approved charitable institution, for higher education under Section 80E of Income-tax Act, 1961. This deduction is available for eight successive years beginning from the financial year in which the tax payer starts paying the interest. So you can claim deduction for interest paid on this education loan.

However, you cannot claim any deduction for tuition fee paid for her under Section 80C as it can only be claimed for a child and not spouse.  

Also keep in mind that there is no tax benefit available for repayment of the principal amount of the education loan. Also, these deductions are not available if you opt for the new tax regime.

I have bought zero coupon bonds. Do I have to pay tax every year on interest on accrual basis or does it needs to be paid at the time of redemption on cumulative basis?  

Zero coupon bonds, which are also called deep discount bonds, do not have any rate of interest i.e., the coupon rate is actually zero. These are issued at a discount to the face value, and the difference between the issue price and the face value is essentially the return that the investor gets.  

For example, if the issue price of a bond is Rs 10,000 and the maturity value is Rs 20,000, the discount of Rs. 10,000 is the return for the investor. Since these do not have any stated interest rate, no interest accrues on it on an annual basis, and the tax has to be paid only at time of maturity and not on year-to-year basis. The difference between the issue price and the maturity value would be taxed as capital gains and not as interest. The investor has to pay capital gains tax at 10 per cent if the bonds are listed, else tax at 20 per cent on the difference would apply.  

The author is a tax and investment expert

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