Many families buy a house in the wife’s name, but the husband may be paying some or all of the home loan EMIs. In such situations, a common following question arises:
Question:
If a residential property is purchased solely in the wife’s name and the home loan EMI is being paid by the husband, can both husband and wife claim the home loan interest deduction while filing their Income Tax Return (ITR) under old tax regime?
Answer:
No, both spouses cannot claim the home loan interest deduction simply because one person owns the property and the other pays the EMI.
A taxpayer must satisfy two key conditions to claim a deduction for home loan interest.
- The taxpayer must be the owner or co-owner of the property.
- The taxpayer must be liable for the home loan repayment and actually bear the interest cost.
Therefore, if the property is registered solely in the wife’s name and the husband is paying the EMI, the husband generally cannot claim the interest deduction, as he is not the owner of the property.
Similarly, the wife may also face challenges in claiming the deduction if the loan repayments are not being made from her own bank account or financial resources. During an income tax assessment or scrutiny, the tax authorities may question whether she has genuinely incurred the interest expense.
Tax Planning Tip
To avoid disputes and ensure smooth claim of home loan tax benefits, it is advisable that:
- The person claiming the deduction is the owner or co-owner of the property.
- The EMI is paid from the bank account of the person claiming the deduction.
- Proper loan and repayment records are maintained.
Example
Suppose a flat is purchased exclusively in Mrs. Sharma’s name, but all EMIs are paid by Mr. Sharma from his bank account. In this case:
- Mr. Sharma cannot claim the home loan interest deduction because he is not the property owner.
- Mrs. Sharma may face difficulty claiming the deduction if she cannot demonstrate that the loan repayment burden is effectively borne by her.
Simple Rule: For claiming home loan tax benefits under the old tax regime, property ownership and loan repayment should ideally be in the same person’s name. This helps ensure compliance and reduces the risk of disputes during tax scrutiny.
