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Deduction in respect of home loan

Kamal Verma (Financial advisor) (582 Points)

10 August 2018

Dear Experts,

House purchased in the name of four family member but home loan taken in the name of one family member, he is repaying loan from his bank account. Will deduction u/s 24 & 80C be allowed to all family members, if yes to what extent?

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9 Replies

Ruchika Somani (Coaching and Practice in Tax Audit Law.) (4429 Points)
Replied 10 August 2018

Deduction under 80C and 24(b) is allowed only to person who does actual repayment even though property is in name of others as well

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CA Neelima Kotha (Consultant) (606 Points)
Replied 10 August 2018

Deduction will be available only to the person who is repaying the loan

Vimal Khatri (Tax Consultant) (115 Points)
Replied 10 August 2018

Yes, deduction u/s 24 & 80C will be allowed to all four family members in the ratio of there ownership as per registry papers. But there is one condition that all the other three members of the family must repay the amount in the ratio of there ownership to the member who is making repayment of the loan from his account. For Example let the four members be A,B,C & D. For now, let the share of ownership be equal i.e. 25% each. Mr. A has paid 100/- from his a/c as repayment of loan. Now for taking deduction u/s 24 & 80C all the other members, i.e. Mr. B,C & D have to repay 25/- each (25% of 100/-) to Mr. A.

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Vaishnavi Ganesh (Chartered Accountant) (861 Points)
Replied 10 August 2018

Originally posted by : Vimal Khatri
	Yes, deduction u/s 24 & 80C will be allowed to all four family members in the ratio of there ownership as per registry papers. But there is one condition that all the other three members of the family must repay the amount in the ratio of there ownership to the member who is making repayment of the loan from his account. For Example let the four members be A,B,C & D. For now, let the share of ownership be equal i.e. 25% each. Mr. A has paid 100/- from his a/c as repayment of loan. Now for taking deduction u/s 24 & 80C all the other members, i.e. Mr. B,C & D have to repay 25/- each (25% of 100/-) to Mr. A.

I agree with Vimal

Keshav Dutt Beetan (Deputy Manager) (32 Points)
Replied 10 August 2018

But, what, if they don't repay 25/- each to Mr. A?

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Vimal Khatri (Tax Consultant) (115 Points)
Replied 10 August 2018

then rest of the members will not be elegible for deduction u/s 24 & 80C

Vaishnavi Ganesh (Chartered Accountant) (861 Points)
Replied 10 August 2018

Originally posted by : Keshav Dutt Beetan
	But, what, if they don't repay 25/- each to Mr. A?

After all it is family members, all of them are relatives, it can be claimed assuming that its out of common fund of the family.

Vimal Khatri (Tax Consultant) (115 Points)
Replied 10 August 2018

Yes, But in case any scruitiny arises in any of the files, then it will be difficult to explain that why the loan is being paid by just 1 member & Tax benefit is being taken by all 4 members. Though it is a family matter, but income tax department does not considers such type of family matters. Also the assessing officer may conclude thinking that it is an act for saving tax of Mr. A (the person who is repaying the loan from his account) or Registry is made in the name of all 4 members, loan has been taken in the name of all 4 member because it was not possible for Mr. A to get loan on his own & actually (off the records) the property belongs to Mr. A only & that is why he is paying the loan alone from his account. Therefore, in order to avoid such unexpected future circumstances repayment of loan must be made by all the members in the ratio of there ownership of the property.

rama krishnan (12239 Points)
Replied 11 August 2018

proportionate basis applicable only if the loan was taken jointly by two or more persons. when the loan is taken by one person , the pre-requisite condition for claiming deductions is that the borrower should have either single ownership or co-ownership. if it so, then he is fully eligible to claim the principal and interest payments made on the housing loan there's no requirement for proportionate calculation