“You may fund the dream — but unless you own the paper, you can’t claim t deduction.”
In the modern Indian family, financial support across generations is an act of love — children repaying parents’ home loans, siblings supporting each other’s education, spouses jointly shouldering liabilities. But the Income Tax Act does not reward emotion; it rewards documented legal eligibility.
This comprehensive guidance note addresses a question that haunts many well-intentioned taxpayers:
If I’m paying EMIs for my parent’s, sibling’s, or spouse’s loan, can I claim a tax deduction?
The answer? Not unless you’re legally and financially linked — as per strict conditions under Sections 80C, 24(b), and 80E.
Law First: The Legal Eligibility Framework
Home Loan Deductions
| Component | Section | Limit | Who Can Claim |
|---|---|---|---|
| Principal repayment | 80C | ₹1.5 lakh | Must be owner + borrower |
| Interest repayment | 24(b) | ₹2 lakh (self-occupied); full (let-out) | Must be owner + borrower |
Education Loan Deductions
| Component | Section | Limit | Who Can Claim |
|---|---|---|---|
| Interest repayment | 80E | No limit (up to 8 assessment years) | Loan must be in your name and for education of self, spouse, children, or legal ward |
Judicial Authority: Where Courts Drew the Line
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Hiralal B. Jain v. ITO [(2009) 29 SOT 362 (ITAT Mumbai)]: Co-borrower not being a co-owner – claim disallowed.
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Kishore Lal v. ITO [(2008) 115 TTJ 841 (Delhi)]: Son repaying father’s home loan – no ownership – deduction denied.
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Gaurav Goyal v. ITO [(2012) 26 taxmann.com 25 (Delhi)]: Education loan for brother – no deduction allowed.
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CBDT Circular No. 8/2007, dated 05.12.2007: Clarifies that Section 80E covers only loans for self, spouse, children, or legal ward.
Trigger Points & Thresholds: When Documentation Overrides Emotion
| Trigger | Outcome | Required Action |
|---|---|---|
| You pay EMIs for property not in your name | ❌ No 80C/24(b) benefit | Ensure co-ownership in the registered sale deed |
| You’re only a financial supporter (not borrower) | ❌ Deduction not allowed | Get your name on the loan sanction letter |
| Interest exceeds ₹2 lakh (self-occupied property) | 24(b) limit breached | Consider letting out to claim full interest deduction |
| Loan is in your name for child’s education | ✅ 80E allowed | Stay in old regime — 80E not allowed in new regime |
| You switch to new regime (115BAC) | ❌ 80C & 80E not available | Choose old regime if you intend to claim these deductions |
Visual Matrix: Can You Claim the Deduction?
| Scenario | Relationship | Loan In Whose Name? | Ownership Present? | Deduction Allowed? | Section | Tax Regime |
|---|---|---|---|---|---|---|
| Pay EMIs for father’s home | Parent | Father | No | ❌ No | – | – |
| Co-borrower for brother’s house | Sibling | You (co-borrower) | No | ❌ No | – | – |
| Co-owner & co-borrower for spouse’s flat | Spouse | You + Spouse | Yes | ✅ Yes | 80C + 24(b) | Old/New |
| Pay education loan for child | Child | You | NA | ✅ Yes | 80E | Old only |
| Pay EMIs for sibling’s education | Sibling | You | NA | ❌ No | – | – |
Strategic Tax Planning: Avoid These Mistakes
✅ What You Should Do
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Be co-owner in property deed and co-borrower in loan documents for home loan deductions.
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Take education loans in your own name for child/spouse to claim 80E.
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Use bank gifts to parents/siblings if you want to help without tax confusion.
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Stay in old regime if you wish to claim 80C/80E.
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Maintain all records: sale deed, loan agreements, EMI proofs, interest certificates.
❌ What You Should Avoid
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Paying EMIs for relatives without being on paper (no deduction allowed).
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Assuming that co-borrower status alone is enough — ownership is also mandatory.
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Claiming 80E for loans taken for anyone other than self/spouse/child/ward.
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Ignoring the regime impact — many deductions are not available under the new regime.
Real-Life Personas (with Tax Consequences)
Rohit – The Misguided Son
Pays ₹25,000/month for his father’s home loan.
But he is not on the title deed or the loan document.
🧾 Result: No deduction under 80C or 24(b), despite paying full EMI.
✅ Better Planning: Could have gifted ₹25,000/month to father; let father claim.
The Smart Joint Owner
Pays EMIs for a jointly owned home with her spouse.
Her name is on the sale deed and loan.
🧾 Result: Gets full deduction under 80C & 24(b).
✅ Best Strategy: Allocates proportionate share of EMIs and claims accordingly.
Kunal – The Regime Blunderer
Took education loan in his name for his daughter.
Switched to new tax regime for lower slab rates.
🧾 Result: Lost entire 80E deduction of ₹78,000/year.
✅ Better Strategy: Should have stayed in old regime.
Regime Comparison: Should You Switch?
| Deduction | Old Regime | New Regime |
|---|---|---|
| 80C (Principal on home loan) | ✅ Allowed | ❌ Not allowed |
| 24(b) (Interest on home loan) | ✅ Allowed | ✅ Allowed |
| 80E (Education loan interest) | ✅ Allowed | ❌ Not allowed |
Final Words: Good Intentions Need Legal Backing
“Paying from the heart may be admirable, but only what’s backed by paperwork is deductible in the eyes of the law.”
When you pay EMIs for someone else’s benefit, it doesn’t matter if it’s your father, brother, or best friend — what matters is:
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Are you legally liable on the loan?
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Are you the owner of the asset?
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Are you in the right tax regime?
Only yes answers get you tax relief. Anything else is just charity — beautiful, but not deductible.
