Published 26 October 2026
Banks often ask for a spouse or parent as co-applicant, and builders often register flats in two or three names. The tax position does not follow the loan papers. Each co-owner is taxed separately on his or her share of the house. Each can claim interest only on a loan on which he or she is liable. The Rs 2 lakh cap on a self-occupied house applies to each co-owner separately, so two co-owners who both own and both borrow can claim up to Rs 4 lakh between them. A co-borrower who owns no share gets nothing. A co-owner who borrowed nothing gets no interest deduction, but still gets a share of the house. This guide explains how the two Acts treat co-owners, and what decides each person’s share when the deed is silent.
Which Act governs which year
- Financial year 2025-26 (assessment year 2026-27) and earlier. Co-owners are dealt with in section 26 of the Income-tax Act, 1961, deemed owners in section 27, and the interest deduction in section 24(b).
- Tax year 2026-27 onwards. The counterparts in the Income-tax Act, 2025 are section 24 (co-owners), section 25 (deemed owners) and section 22 (interest).
Co-owners are taxed separately
Section 26 says that where property “is owned by two or more persons and their respective shares are definite and ascertainable”, they “shall not in respect of such property be assessed as an association of persons”. Instead, “the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income”. Section 24(1) of the 2025 Act says the co-owners’ “income computed separately under this Part as per their respective share shall be included in their total income”.
Self-occupation for each. The Explanation to section 26 says the nil annual value for a self-occupied house is applied “as if each such person is individually entitled to the relief”. Section 24(2) of the 2025 Act says the relief in section 21(6) “shall be provided as if each co-owner is individually entitled to the said relief”. So each co-owner can treat the house as one of his or her own two self-occupied houses.
The interest cap for each. Each co-owner’s share of income is computed under sections 22 to 25 (sections 20 to 23 in the 2025 Act), and the caps on interest form part of that computation. Each co-owner’s self-occupied interest is therefore capped at Rs 2,00,000 (or Rs 30,000) in his or her own hands. The cap is not shared between them.
Two conditions for each co-owner’s interest claim
Ownership. Only an owner, or a person deemed to be one, has income from house property, so only an owner can deduct interest against it. A parent who co-signs the loan but is not on the title deed has no house property income and no deduction. The site’s guide on joint, inherited and gifted property explains how ownership is established.
Borrowing. Section 24(b) allows “interest payable on such capital”, meaning capital borrowed for the property. A co-owner who is not a borrower has no interest payable. The section 24(b) certificate must come from “the person to whom any interest is payable”, and it must state “the amount of interest payable by the assessee”.
The text does not settle how the interest is divided when the loan and the title are both joint. Section 26 speaks of a share “in the income from the property”, which points to the ownership share. Section 24(b) speaks of interest payable by the assessee, which points to each person’s liability on the loan. The Tribunal has looked at who actually paid.
When the deed does not state the shares
In ITO v Tushar Natverlal Dharia (ITAT Mumbai, 15 May 2026, ITA No. 8142/Mum/2025, AY 2021-22), the assessee sold shares and bought a flat in Simla House, Nepean Sea Road, Mumbai, for about Rs 11.07 crore, including stamp duty. The purchase deed named three co-owners: the assessee, his wife and his daughter-in-law. It did not state their shares. The housing loan was in the names of five borrowers, and the loan papers did not divide the liability either. The assessee claimed the section 54F exemption and the section 24(b) deduction on the basis that he and his wife had paid 88 and 12 per cent of the price, supported by bank statements. The Assessing Officer took his share of the flat as one-third and his share of the loan as one-fifth. The Commissioner (Appeals) accepted the assessee’s figures, and the Tribunal dismissed the Revenue’s appeal. It held that where the deed is silent, the consideration actually paid decides each co-owner’s share. It allowed the section 24(b) deduction “in accordance with the assessee’s contribution in purchase consideration and share of liability in housing loan”. It added the condition that the other co-owners must not claim the same benefit. The order is on BharatTax case law.
In Pradeep Kumar Joshi v ITO (ITAT Mumbai, 11 August 2026, ITA No. 3501/Mum/2026, AY 2019-20), the Assessing Officer allowed only one-third of the interest, on the footing that three persons had borrowed jointly. Before the Tribunal the assessee produced:
- the registered agreement, showing that only he and his father owned the flat;
- the loan statement and the lender’s certificate, showing that he alone had paid the interest of Rs 97,806; and
- his father’s return, which claimed none of it.
The Tribunal admitted this evidence and sent the claim back to the Assessing Officer to decide afresh, relying among others on Tushar Dharia. It did not itself decide how much was deductible. The case shows the documents the dispute turns on. Its order is on BharatTax case law.
Neither decision is from a High Court, and this guide has not found a High Court ruling on how a joint loan’s interest is divided between co-owners.
A worked example
A married couple own a flat in equal shares, are joint borrowers, and pay the instalments equally from their own accounts. They live in the flat. The house was completed within five years and the lender’s certificate names both. Interest payable for AY 2026-27 is Rs 5,00,000.
| Spouse A | Spouse B | |
|---|---|---|
| Share of interest | 2,50,000 | 2,50,000 |
| Cap for a self-occupied house | 2,00,000 | 2,00,000 |
| Deduction in the old regime | 2,00,000 | 2,00,000 |
| Deduction if this spouse is in the new regime | nil | nil |
Each spouse chooses a regime separately in his or her own return. If one is in the new regime, that spouse’s share of the interest is simply lost; it does not pass to the other. The same applies to principal repayment under section 80C (see Section 80C: What Qualifies and What to Keep). It also applies to the first-home deductions (see First-Home Deductions: Sections 80EE and 80EEA). Each of these is claimed by each individual on his or her own payment and conditions.
When one spouse paid for the other
Two rules can move income back to the spouse who provided the money:
- Deemed ownership. An individual who transfers a house to a spouse “otherwise than for adequate consideration”, other than under an agreement to live apart, is deemed to be its owner (s.27(i); s.25(a) of the 2025 Act).
- Clubbing. Income from assets transferred to a spouse without adequate consideration is included in the transferor’s income (s.64(1)(iv); s.99(1)(a)(ii) of the 2025 Act).
So a share registered in a spouse’s name, but paid for by the other spouse, may be taxed in the payer’s hands. A gift between spouses is not itself taxed as income of the recipient, because a spouse is a “relative”. The guide on joint, inherited and gifted property deals with both rules.
What to have ready
- The title deed stating each co-owner’s share. If the deed is silent, bank records showing who paid what towards the price, stamp duty and registration.
- The loan agreement naming every borrower.
- The lender’s interest certificate. Some lenders show each borrower’s share of interest and principal on the certificate; otherwise each co-owner relies on the joint certificate and a statement of the division used.
- Bank statements showing which co-owner’s account paid the instalments.
- Each co-owner’s return, so that the same interest is not claimed twice. The Tribunal in Tushar Dharia allowed the deduction on that condition.
- The regime each co-owner has chosen for the year.
Reporting and corrections
- Each co-owner reports separately. In the house property schedule of his or her own return, each co-owner gives the property, his or her percentage share and his or her share of the interest. The tenant’s details are given where the house is let. See House Property Income: Let-Out and Self-Occupied.
- Due date. The section 139(1) or section 263(1) date for each co-owner. The old regime is available only in a return filed by that date; see Belated and Revised Returns.
- Corrections. A wrong division of interest is corrected by each co-owner’s revised return.
The site’s article on joint ownership and joint loans covers the same ground. Two of its statements are not supported by the Act. It gives the section 80EEA window as running to 2022-23; the Act says 31 March 2022. It also says that putting an existing house into joint names with a spouse triggers section 56(2)(x); a spouse is a relative, so that provision does not apply, although sections 27(i) and 64(1)(iv) may.
In order
- Establish each co-owner’s share from the deed, or from the payments if the deed is silent.
- Establish each co-owner’s liability on the loan and who paid the interest.
- Compute each co-owner’s share of income separately, treating the house as self-occupied for each where it is so occupied.
- Apply the Rs 2,00,000 (or Rs 30,000) cap in each co-owner’s own computation, and only for a co-owner in the old regime.
- Make sure no two co-owners claim the same rupee of interest, and that each return gives the same shares.
The next guide, First-Home Deductions: Sections 80EE and 80EEA, deals with the extra deductions some first-time buyers can claim on top of section 24(b).