We are planning to buy a new house in India of which my mother will be the sole-owner. At present, she doesn't have any source of income. Now I have two questions in it.
Is it possible for me to take home loan as co-borrower along with my mother though she won't be paying so I can show my income proof to get that. ?
If aforesaid is possible, can I avail tax benefit in the same.?
This depends on Bank to Bank. There are quite a few banks that would allow you to be co-borrower even if your name is not listed as the co-owner. There are some Banks that require you to be co-owner.
Tax rebate can only be claimed if you are co-owner and not just co-borrower. You can claim income tax benefit for the interest paid by you, subject to a limit of Rs2,00,000 provided your mother does not claim this.
However, in my suggestion, it would be better to take the loan in your mother's name and show that you pay her a rent. This will help you claim House Rental Allowance (HRA)if you are working for a company which offers you HRA. This will help you in saving lot more tax.
For Ex. Assuming your mother is not a senior citizen, she can get an income of upto Rs 4.3 Lacs, without paying any tax on it. (Rs 2.8L exemption and Rs 1.5L under Section 80C). Hence, you can pay her Rs 4,30,000/12 = Rs 36000 (approx) as rent which will be tax free for her. And, in return, depending on your salary, you can get a tax exemption of upto Rs 32000 per month. Again this is based on the assumption that the Rs 32000 is the prevalent market rate of rental property in the said area. If the prevalent rate is less, it would amount to evasion of taxes.
