Nisha and Narain bought two houses and is paying Equated Monthly Installments (EMI) for both. She wants to know how to get maximum tax rebate on it.
However, Nisha would then have to pay tax on the rental income since the rent received will be treated as income.
Let’s assume the rental income for the apartment is Rs 100. As part of deductions before tax, 30 per cent of the income is deductible towards maintenance. This then leaves Rs 70 as the taxable income.
Ideally, in a situation like this, it is best to opt for a joint home loan. Narain and Nisha could have done the same. Since they both are salaried employees, they can club both their incomes and avail of a higher loan. The obvious advantage is the increase in loan eligibility. Banks often insist that co-owners of the property, should be co-borrowers as well. Being co-owners and repaying a joint home loan would entitle both Narain and Nisha for higher tax benefits jointly. They can avail these benefits according to the proportion of their individual shares of the loan.