I am an Indian citizen and have an older brother who works in Switzerland. We are both in our early 30s and have no loan under our names. We want to buy an apartment in New Delhi or Ahmedabad, and for this purpose we need a home loan. This will be the first asset in the name of any of us or jointly. Can my brother and I use a joint loan? How will the home loan EMI tax credit be calculated and how will it be applied in this case? Is it advisable to use a joint loan or should it be in the name of one of us?
—Name not disclosed upon request
Based on the bank’s eligibility criteria, you and your brother can apply for a joint home loan. However, in the case of a joint home loan, most banks insist on joint ownership of the property.
Since the property is likely to be shared equally between your brother and you, the taxation of property income will also be split equally. In the event that the property is intended for your own residence or is not occupied by your brother and you work elsewhere, your brother / you can claim a home loan interest deduction of up to ₹2 lakhs per financial year as loss from household property. The deduction will be available to the individual who paid for the EMI. If your brother and you both have contributed to EMI, then the deduction will be proportional to the ratio of the contributions, subject to the cap ₹2 lakhs per person.
In addition, in relation to the principal of the loan received from the Indian bank, your brother / you may demand a deduction of the installment repayment, stamp duty, registration fee and other eligible home purchase costs subject to the total limit of ₹1.5 lakhs for each financial year. But such a deduction is only possible if your brother / you have taxable income in India (other than specified income such as long-term capital gains).
In addition, depending on the bank’s own eligibility criteria, property value and your ability to pay, you can apply for a home loan jointly or separately.
Sonu Iyer is Tax Partner and Head of Human Resources at EY India.
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