Co-borrowers of a home loan can claim tax benefits based on their respective share in the property

I had opted for a new tax regime for FY21-22 with my employer, and the tax was deducted accordingly. I was unable to file an RTI before the due date of July 31, 2022. Now I realize that I have to pay a lot of money because it is calculated under the old tax system. Is there a way to help me get out of this situation with less tax?

Answer: Under the new tax system you can benefit from lower tax brackets, but this does not allow many exemptions and deductions, whereas under the old tax system you have to pay taxes at higher slab rates high, but at the same time you can take advantage of various exemptions and deductions. A salaried person must inform his employer of the tax regime he wishes to opt for and the employer deducts the tax accordingly. The option of a special tax regime exercised with the employer is for the limited purposes of tax deduction. The final choice of the tax regime must be made when filing the ITR, which may even be different from that exercised with the employer.

A salaried person can choose between these two tax regimes each year, while the person with income under the heading “Business or professional profits and gains” cannot switch between the old and the new tax regime each year and must remain under the new tax regime only. Therefore, he has only one chance to revert to the old tax system and cannot choose the new tax system in the future. The option to opt between the old and the new tax system by an employee can only be exercised if the RTI is filed on time. If you don’t, you have no choice but to file the ITR only under the old regime and pay the tax accordingly.

I bought a condominium house with my brother and took out a mortgage with a bank. Bank manager says EMI should be paid through Electronic Clearance Service (ECS) from one bank account. An interest and principal repayment certificate will also be issued in common name. I transferred my share of EMI to my brother’s account, and all EMI will be paid through ECS from his bank account. In this situation, can we both benefit from a mortgage, and in what proportion?

Answer: The lenders issue a single certificate of payment of interest and reimbursement of the principal in the event of a solidarity mortgage, mentioning the names of all the co-borrowers because the bank would not know the respective shares of each co-borrower in the housing loan. Even if the bank issues a single certificate for a joint mortgage, individual co-borrowers can claim tax benefits up to their share in the mortgage. Please note that the respective share of the mortgage and the property crystallizes at the time of purchase; thus, your share in the home loan and the EMI cannot be changed later.

The bank will register a single ECS for a joint mortgage loan even if there are several joint borrowers. You have two options. You open a joint bank account solely for servicing the home loan and transfer your respective shares to this account. Alternatively, a borrower can pay the EMIs from his bank account, and the other co-borrowers transfer their respective shares in the EMIs to this bank account.

Since you have transferred your share to your brother’s bank account, you can benefit from the tax advantages without any problem. You will get the advantage in the ratio of your respective share in the home loan.