Tax Benefits on Joint Property and Joint Home Loan — Deductions, Rental Income, and Capital Gains (AY 2026-27)

Buying a house with a spouse, parent, or sibling is common in India — and it comes with a significant tax advantage that most co-owners don't fully claim. When two people jointly own a property and co-borrow the home loan, each co-owner can independently claim deductions on their share, effectively doubling the household's tax savings.

But the rules have conditions, and mistakes invite scrutiny. This guide covers exactly how joint ownership and joint home loans are taxed under both the old and new tax regimes for AY 2026-27.

Who Qualifies as a Co-Owner for Tax Purposes?

For income tax purposes, a co-owner is any person who has a legal share in the property — whether equal or unequal. Co-ownership is typically established through:

• The sale deed mentioning both names
• A registered agreement specifying ownership shares
• Both names appearing in the property registration records

Being a co-borrower on the home loan is not enough to qualify for deductions. You must also be a co-owner of the property. Banks often add earning family members as co-borrowers for loan eligibility, but unless that person's name appears on the property documents, they cannot claim tax benefits on the loan.

Key Requirement: Ownership + Payment

To claim any deduction, a co-owner must satisfy both conditions:

1. They must be a legal co-owner of the property
2. They must be actually paying their share of the EMI or interest

If one co-owner pays the entire EMI but the property is jointly owned, only the person making the payment can claim the deduction — and only up to their ownership share.

Home Loan Interest Deduction Under Section 24(b)

Under the old tax regime, each co-owner can claim a deduction on the interest paid on the home loan, subject to these limits:

Example: Joint Home Loan on Self-Occupied Property

Rahul and Priya (married couple) jointly purchase a flat for Rs 1.2 crore with a 50:50 ownership ratio. They take a joint home loan of Rs 90 lakh. In FY 2025-26, the total interest payable is Rs 7,20,000.

Under the old tax regime:

• Rahul's share of interest: Rs 3,60,000 — he claims Rs 2,00,000 (Section 24(b) cap for self-occupied)
• Priya's share of interest: Rs 3,60,000 — she claims Rs 2,00,000

Total household deduction: Rs 4,00,000 — double what a single owner could claim.

New Tax Regime: No Benefit for Self-Occupied Property

Under the new tax regime (Section 115BAC), the interest deduction on a self-occupied property is not available. If both Rahul and Priya are on the new regime, they get zero benefit from Section 24(b) on their self-occupied home.

However, for a let-out (rented) property, interest deduction is available under both regimes since it is part of computing income under the "Income from House Property" head, not a Chapter VI-A deduction.

Principal Repayment Under Section 80C

Under the old tax regime, each co-owner can claim the principal repayment portion of their EMIs under Section 80C, up to the overall Rs 1,50,000 limit. This includes:

• Principal component of home loan EMIs
• Stamp duty and registration charges (in the year of purchase)

Under the new tax regime, Section 80C deductions are not available, so principal repayment offers no tax benefit.

Example Continued

In FY 2025-26, Rahul and Priya's total principal repayment is Rs 4,80,000 (Rs 2,40,000 each). Under the old regime, each can claim Rs 1,50,000 under Section 80C (subject to the overall cap, which includes other 80C investments like PPF, ELSS, and life insurance premiums).

How Rental Income Is Taxed for Co-Owners

When a jointly owned property is let out, the rental income is split between co-owners in their ownership ratio — not equally, unless the ownership itself is equal.

Each co-owner:

1. Reports their share of rental income
2. Claims the 30% standard deduction on their share (available under both regimes)
3. Claims interest deduction on their share of the home loan

Example: Rented Joint Property

Amit and his father Suresh own a property 60:40. Monthly rent received is Rs 50,000 (Rs 6,00,000 per year). Total home loan interest: Rs 4,00,000.

Amit's computation (60% share):

Suresh's computation (40% share):

The loss from house property (if interest exceeds income) can be set off against other income, up to Rs 2,00,000 per co-owner per year under both regimes. Any unabsorbed loss is carried forward for 8 assessment years.

Stamp Duty and Registration Charges

The stamp duty and registration charges paid at the time of property purchase are deductible under Section 80C (old regime only), in the year the payment is made.

If both co-owners contribute to stamp duty — say Rs 4,00,000 total with a 50:50 split — each can claim Rs 2,00,000 under Section 80C, subject to the Rs 1,50,000 overall ceiling.

Practically, stamp duty alone often exhausts the Section 80C limit in the year of purchase, leaving no room for PPF or ELSS deductions that year. Plan your other Section 80C investments accordingly.

Capital Gains on Selling a Jointly Owned Property

When co-owners sell a jointly owned property, the capital gain is computed separately for each co-owner based on their ownership share.

How to Compute Each Owner's Capital Gain

1. Sale consideration: Total sale price split per ownership ratio
2. Cost of acquisition: Original purchase price split per ownership ratio
3. Indexation: Each co-owner applies the Cost Inflation Index (CII) independently (for long-term gains under the old regime, if applicable)
4. Capital gain: Sale consideration minus indexed cost, for each owner separately

For AY 2026-27, long-term capital gains on property held for more than 24 months are taxed at 12.5% without indexation (as per the revised rules effective from 23 July 2024). Each co-owner computes their gain independently.

Section 54 Exemption: Each Co-Owner Can Claim Separately

Here's the powerful part — each co-owner can independently claim exemption under Section 54 by investing their share of capital gains in a new residential property.

This means if Rahul and Priya sell their jointly owned property for a long-term capital gain of Rs 40,00,000 (Rs 20,00,000 each), both can separately:

• Purchase or construct a new residential house within the prescribed timeline
• Deposit their share in a Capital Gains Account Scheme (CGAS) if they haven't identified a new property yet
• Claim full exemption on their respective shares

They can even invest in the same new property jointly and both claim exemption.

Section 54EC Bonds

Alternatively, each co-owner can invest up to Rs 50,00,000 in Section 54EC bonds (NHAI, REC, IRFC, PFC) within 6 months of the sale. With two co-owners, the household can effectively park up to Rs 1,00,00,000 in these bonds to save capital gains tax.

Pre-Construction Interest: Don't Forget This Deduction

If your jointly owned property is under construction and you're paying EMIs before possession, the interest paid during the pre-construction period is deductible in five equal instalments starting from the year you receive possession.

Each co-owner claims their share of the pre-construction interest in addition to the current year's interest. The combined deduction (pre-construction instalment + current year interest) is still capped at Rs 2,00,000 per person for a self-occupied property under the old regime.

Example

Total pre-construction interest: Rs 8,00,000 (Rs 4,00,000 per co-owner with 50:50 ownership). Annual instalment for each co-owner: Rs 80,000 over 5 years, claimed alongside regular interest.

Deemed Let-Out Rules for Multiple Properties

Under current rules, a taxpayer can declare two properties as self-occupied (with nil annual value). Any additional property is treated as "deemed let-out" — its notional rent is taxable even if it's vacant.

This rule applies per taxpayer, not per property. So if Rahul owns his share of two jointly owned properties and one individually owned flat, only two of the three can be declared self-occupied. The third is deemed let-out, and his share of its notional rent becomes taxable.

Common Mistakes to Avoid

Claiming without ownership: A co-borrower who isn't a co-owner cannot claim any deduction. Banks adding a spouse as co-borrower for loan eligibility doesn't create ownership rights.

Mismatched ratios: If the property is owned 70:30 but the loan is taken 50:50, the deduction is limited to the lower of ownership ratio or loan payment ratio for each person. Keep your ownership and loan contribution ratios aligned.

Not maintaining proof of payment: Each co-owner should pay their EMI share from their own bank account. A single account paying the entire EMI makes it harder to prove split claims during assessment. Set up standing instructions from separate accounts if possible.

Double-counting under Section 80C: If one co-owner already claims the full Rs 1,50,000 through PPF, ELSS, and insurance, adding principal repayment provides no additional benefit. Coordinate your 80C claims to maximize the household's total deduction.

Ignoring TDS on sale (Section 194-IA): When selling a jointly owned property for more than Rs 50 lakh, the buyer must deduct TDS at 1% on the total consideration. Each co-owner receives their share of TDS credit in proportion to their sale consideration, which they claim in their respective ITRs.

Filing Your ITR as a Co-Owner

Both co-owners must report their share of house property income in their individual ITRs. In the "Income from House Property" schedule:

1. Enter the property details (address, ownership percentage, co-owner PAN)
2. Report your share of annual value or rent received
3. Claim the 30% standard deduction
4. Enter your share of home loan interest under Section 24(b)

If you're filing ITR-1, you can report one house property. For multiple properties or if you have capital gains from a property sale, use ITR-2. 49Tax's AI can automatically split the income and deductions based on your ownership ratio when you upload both co-owners' Form 16 and loan statements.

Actionable Takeaway

Joint ownership can nearly double your household's tax savings on a home loan — but only when both co-owners are on the property documents, both contribute to the EMI from their own accounts, and both file their returns claiming their respective shares. Before the filing deadline, verify that your home loan interest certificate splits the interest correctly between co-borrowers, and align your ownership ratio with your loan contribution ratio to avoid mismatches that invite scrutiny.