Married couples can now choose different income tax regimes for the financial year 2025-26, impacting how they claim home loan deductions. To claim these benefits, spouses must be co-owners and co-borrowers who contribute to EMI payments. By analyzing their individual tax liabilities, couples can strategically select regimes to maximize their total household tax savings.
Detailed Coverage
As the financial year 2025-26 progresses, married couples filing their income tax returns have the flexibility to select different tax regimes. This choice is particularly significant for those managing joint home loans, as the tax regime chosen by each spouse dictates which deductions can be claimed for principal repayments and interest payments.
Eligibility Criteria for Joint Borrowers
Simply being named on a loan document does not automatically entitle both spouses to tax breaks. To claim home loan deductions, the tax department requires that both individuals are co-owners of the property and co-borrowers on the loan. Furthermore, each spouse must be able to prove that they are contributing to the monthly Equated Monthly Installment (EMI) payments. If only one spouse is paying the EMI, the other spouse generally cannot claim a share of the tax deduction, even if they are a co-applicant on the loan agreement.
Impact of Tax Regimes on Deductions
The choice of tax regime fundamentally changes how housing expenses are treated. Under the old tax regime, taxpayers remain eligible for traditional deductions. Each spouse can claim up to ₹1.5 lakh for principal repayment under Section 80C and up to ₹2 lakh for interest paid on a self-occupied property under Section 24(b). If the property is let out, the ₹2 lakh interest cap does not apply to the deduction; however, the total loss from house property that can be set off against other income sources, such as salary, is limited to ₹2 lakh per taxpayer annually. Any remaining loss can be carried forward to future years.
In contrast, the new tax regime is designed with fewer deductions. For self-occupied properties, individuals generally cannot claim deductions for home loan principal or interest payments. If the property is let out, the interest paid can be set off against the rental income earned. However, if the interest deduction creates a loss on the house property, this loss usually cannot be used to reduce tax liability on salary or other income under the new regime rules.
Strategic Planning for Household Savings
Couples often make the mistake of assuming that both spouses must opt for the same tax regime for simplicity. However, tax planning experts emphasize that a personalized assessment is essential. Because each spouse may have different salary structures, other investments, and deduction eligibility, one spouse might benefit more from the old regime while the other finds the new regime more tax-efficient. By running calculations based on their specific income and financial goals, couples can identify the most effective combination of regimes to lower their overall household tax burden.
The next step for taxpayers is to calculate their expected taxable income under both scenarios before the final filing deadline. Investors should also maintain clear documentation of EMI contributions and co-ownership status to ensure that their claims are compliant during the tax assessment process.