For spouses to claim home-loan tax deductions on jointly owned properties, both must fulfill specific criteria beyond simply adding names to property documents. According to Archit Gupta, CEO and Founder of ClearTax, both spouses must be co-owners of the property and co-borrowers on the loan, and both must actually contribute to the EMI. Ownership alone or borrower status alone does not automatically qualify for deductions. The Income-tax Act allows properties to have any number of co-owners, with each eligible co-owner able to claim deductions based on their share and contribution. This requirement is further reinforced by the Pradhan Mantri Awas Yojana (PMAY), which mandates that a woman's name appear as the property owner or co-owner to access scheme subsidies, ensuring women gain legal property rights and financial security.
For self-occupied properties, each eligible co-owner can claim a deduction of up to ₹2 lakh annually on home-loan interest, subject to applicable tax rules and conditions. As reported by ClearTax, where couples jointly own a house, jointly borrow the loan, and both contribute to EMI, their combined interest deduction can potentially reach ₹4 lakh. However, the ₹2-lakh limit does not automatically allow each spouse to claim ₹2 lakh - deductions must be supported by ownership share and actual interest borne. The PMAY scheme further enhances these benefits by providing interest subsidies of up to 6.5% on home loans up to ₹6 lakhs for EWS and LIG categories, resulting in maximum subsidy of approximately ₹2.67 lakh over the loan tenure. For example, a 50:50 ownership structure allows each spouse to claim their share of interest up to ₹2 lakh, while a 20:80 split limits the minority owner's deduction to their smaller portion.
According to ClearTax's illustrative calculation for a couple earning ₹30 lakh each living in a 50:50 self-occupied property, total deductions reach ₹9 lakh each, resulting in taxable income of ₹21 lakh each under the old tax regime with tax payable of ₹4.60 lakh per spouse. Without co-ownership, the household's combined tax bill would be ₹9.36 lakh - ₹15,600 higher than the co-ownership scenario. The PMAY scheme further reduces this burden through principal repayment deduction of up to ₹1.5 lakh annually under Section 80C and interest deduction benefits. For women specifically, PMAY offers faster processing and approval for women applicants, reserved housing units in government-sponsored projects, and preference in allotment draws when multiple applicants compete. The deduction becomes available only after construction completion and possession is taken, with interest during construction claimed separately in five equal instalments from the completion year.
When only one spouse services the EMI while both are owners and borrowers, the spouse bearing the interest cost is the only one eligible for deductions, subject to ownership-related limitations. As explained by Gupta, paying the entire EMI doesn't allow one spouse to claim more than their ownership proportion allows. Conversely, where both spouses genuinely contribute to EMI, both can claim deductions for their actual share of interest borne, each within their ₹2-lakh limit. The distinction is crucial - being a co-borrower without ownership does not create tax deductions, and couples cannot freely rearrange deductions to maximize tax savings. Under PMAY, female ownership or co-ownership is compulsory for EWS and LIG applicants to access subsidies, ensuring women gain legal property rights and financial security. This approach directly supports PMAY's objective of empowering women through property ownership, as property ownership remains concentrated among male family members in many Indian households.
The home-loan interest deduction becomes available after construction completion and possession is taken. According to ClearTax, interest paid during the construction period is treated separately and can be claimed in five equal instalments from the year construction is completed, subject to applicable conditions. This separate treatment ensures proper accounting for interest costs during the construction phase before the property becomes income-generating. The PMAY scheme further supports this through lower interest subsidies of 4% and 3% on loans up to ₹9 lakhs and ₹12 lakhs respectively for MIG applicants, supporting middle-income women seeking affordable financing. These subsidies significantly reduce the total interest payable over the loan tenure, making home ownership financially feasible for women with moderate incomes.
