Co-owner, co-borrower, co-applicant: who can claim home-loan tax deductions under the Income-tax Act, 2025

Rules and rates as of 12 October 2026.

A lender's form, a sale deed and the Income-tax Act use different words for different things, and home-loan tax deductions depend on two of them lining up. Here are the three roles, what the Income-tax Act, 2025 asks for, and the numbers for a couple sharing an ₹80 lakh loan.

Three words, three different documents

• Co-owner is a fact on the sale deed or allotment letter. If your name is on the title, you own a share of the house. If the deed states shares (50:50, 60:40), that is your share; if it is silent, the parties and their adviser have to establish what the share is.
• Co-borrower is a fact on the loan agreement. You signed it and are legally liable to repay the whole loan, jointly and severally with the other borrowers.
• Co-applicant is a lender's word. Banks and housing finance companies use it for anyone whose name and income go on the application, usually because it raises the eligible loan amount. A co-applicant need not be an owner: a parent added only for income is common.

The tax law does not use the word "co-applicant" at all. It looks at ownership and at who borrowed and repaid.

What the Income-tax Act, 2025 says

The 2025 Act replaced the 1961 Act from 1 April 2026 and renumbered the relevant provisions:

• Section 20 charges income from house property in the hands of the person who owns the property. If you are not an owner, you have no house-property income to compute, and so no house-property deductions to claim.
• Section 24 (formerly section 26 of the 1961 Act) deals with property owned by co-owners. Where each co-owner's share is "definite and ascertainable", they are not taxed as an association of persons; each co-owner's share of the income is computed separately and added to their own income. Sub-section (2) gives the self-occupied relief in section 21(6) to each co-owner as if each were individually entitled to it.
• Section 21(6) and (7) set the annual value at nil for a house the owner occupies as a residence (or cannot occupy for any reason), for up to two houses the taxpayer chooses, provided it is not let out in the year.
• Section 22(1)(b) and (c) allow interest on capital borrowed to buy, build, repair or reconstruct the property, and interest for the period before construction finished, claimed in five equal instalments from the year of acquisition or completion. For a section 21(6) property, section 22(2) caps the two together at ₹2,00,000 a year, provided the house is acquired or built within five years from the end of the tax year in which the money was borrowed and you hold the lender's certificate of interest payable (section 22(4)). Otherwise the cap is ₹30,000.
• Section 123 (formerly section 80C) allows up to ₹1,50,000 a year in aggregate for items listed in Schedule XV. One item is repayment of amounts borrowed by the assessee from a bank, co-operative bank, LIC, the National Housing Bank, eligible housing finance companies or certain employers, for buying or building a residential house whose income is chargeable under "Income from house property". Stamp duty and registration paid to transfer the house to you also count in the year paid. If the house is transferred within five years from the end of the tax year in which possession was obtained, the deductions already claimed are taxed as income in that year.

The rule in one line: own it, and owe it

Put together, a person claims the home-loan deductions when two things are true: they own a share of the house, so it is their house-property income being computed, and they are a borrower on the loan whose interest and principal are being paid. Each claims in proportion to their share.

• Co-owner and co-borrower: can claim interest (up to ₹2,00,000) and principal (inside the ₹1,50,000 limit) on their share.
• Co-borrower but not owner (a parent added for income): has no house-property income under section 20, so no interest deduction, and the house is not one whose income is chargeable in their hands, so the principal does not qualify under Schedule XV either.
• Owner but not borrower: the Schedule XV item covers amounts borrowed by the assessee, so principal paid on someone else's loan does not fit it. For interest, the Act's text speaks of interest on capital borrowed for the property and does not spell out whose loan it must be; this is an area of practice and decided cases rather than a bright line in the statute, so a chartered accountant should look at the specific facts.

One more practical point: the Act ties each co-owner's computation to the ownership share, not to who transferred money that month. Where shares are 50:50 but one spouse pays most of the EMI, or the deed is silent on shares, the two can drift apart. Keeping each person's EMI contribution from their own account, in line with the ownership share, makes the claim easy to support if questioned.

Worked example: a couple on an ₹80 lakh loan

Ananya and Rohit (an illustrative couple) buy a flat they will live in, owning it 50:50 under the sale deed, and both sign an ₹80,00,000 loan at an illustrative 8.5% a year floating, for 20 years. Neither owns another house.

EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], where P = ₹80,00,000, r = 8.5% ÷ 12 = 0.0070833 per month, n = 240 months. That gives an EMI of ₹69,426.

Over the first 12 EMIs, each month's interest is the outstanding balance × r, and the rest of the EMI repays principal. Summed over the year: interest ₹6,73,892, principal ₹1,59,218, leaving ₹78,40,782 outstanding. Each spouse's 50% share is interest ₹3,36,946 and principal ₹79,609.

Year 1	Each spouse (co-owner and co-borrower)	Couple total	If only one spouse owned and borrowed
Interest paid (share)	₹3,36,946	₹6,73,892	₹6,73,892
Interest deductible, old regime (cap ₹2,00,000 each)	₹2,00,000	₹4,00,000	₹2,00,000
Principal repaid (share)	₹79,609	₹1,59,218	₹1,59,218
Principal deductible under s.123, old regime (limit ₹1,50,000 each)	₹79,609	₹1,59,218	₹1,50,000
Total deduction, old regime	₹2,79,609	₹5,59,218	₹3,50,000
Tax reduced at an assumed 30% marginal rate (before surcharge and cess)	₹83,883	₹1,67,765	₹1,05,000
Total deduction, new regime (s.202)	₹0	₹0	₹0

Two cautions on the principal line. The ₹1,50,000 under section 123 is shared with everything else in Schedule XV (provident fund, life insurance premium, children's tuition fees and so on), so a salaried spouse whose provident fund contribution already fills the limit gains nothing extra from principal. And the interest share above ₹2,00,000 (₹1,36,946 each here) is simply lost for a self-occupied house; it does not carry forward.

Old regime or new: each spouse decides separately

Section 202 makes the new regime the default for individuals. In computing income under it, the Act disallows section 22(1)(b) interest for a section 21(6) property and all Chapter VIII deductions except a few named ones, which does not include section 123. So for a self-occupied home under the new regime, neither interest nor principal reduces tax. If the house is let out, interest remains deductible against the rent, but a resulting house-property loss cannot be set off against salary under the new regime.

A taxpayer without business income chooses the old regime by exercising the option with the return, year by year. Because each spouse files separately, one may pick the old regime and the other the new, depending on their own income and other deductions. The co-ownership structure only helps the spouse who actually files under the old regime.

Where couples get it wrong

• Adding a spouse to the loan for eligibility but not to the sale deed, then both claiming. The non-owner's claim does not fit the Act.
• Registering the flat jointly with no shares stated, which leaves the "definite and ascertainable" share in section 24 open to argument.
• Assuming a 50:50 deed allows a 70:30 split of deductions because one person paid more. The Act computes each co-owner's income on their share.
• Forgetting that the bank issues one interest certificate for a joint loan; each co-borrower files with a copy and claims only their share.