Buying a Home with Your Sibling: A Smart Move or a Tax Trap?
Buying a home is already a big financial decision. But buying it with your brother or sister adds an extra layer of advantage—and a few hidden tax risks that most people don’t think about.
Let’s break it down in a practical way.
Why siblings buy together
When siblings jointly purchase a flat or house, it’s usually for:
1. Higher loan eligibility
Banks consider combined income, so you may get a bigger loan approval.
2. Shared EMI burden
Instead of one person paying ₹60,000 per month, two can split it.
3. Faster wealth creation
Both siblings become owners of an appreciating asset.
The income tax advantage: Both can claim deductions
If you and your sibling are co-owners and co-borrowers, then both can claim tax deductions (subject to limits).
Home loan interest – Section 24(b)
Each co-owner can claim:
- Up to ₹2,00,000 per year (self-occupied property)
- Combined claim can reach ₹4,00,000 (₹2L + ₹2L)
Principal repayment – Section 80C
Each sibling can claim:
- Up to ₹1,50,000 per year
- Combined benefit up to ₹3,00,000
You must actually pay the EMI from your own bank account and your name must be on:
- Sale deed (ownership)
- Home loan agreement (borrowing)
The biggest tax trap: “Only name on paper” doesn’t work
Many families register property in both siblings’ names, but EMI is paid fully by only one person.
In such cases:
- Tax benefit is generally allowed only to the person paying
- The other sibling may not be able to claim deductions
Ownership percentage and EMI contribution should match for smooth tax claims.
Ownership ratio matters a lot
Example:
- Property value: ₹80 lakh
- Ownership: 50% + 50%
Then:
- Interest deduction is split
- Principal deduction is split
- Capital gains are split
This makes tax handling much cleaner.
What if one sibling lives there and the other doesn’t?
If the property is self-occupied for one sibling, it is treated as self-occupied for both.
If the other sibling lives elsewhere for work and pays rent, they may still claim HRA separately (if eligible).
Future impact: Capital gains tax when you sell
Profit is divided based on ownership share.
Example:
- Total profit: ₹40 lakh
- Ownership: 50% + 50%
- Each pays capital gains tax on ₹20 lakh
Both siblings can claim exemption under Section 54 by reinvesting in another residential property.
Best structure (recommended)
- Both should be co-owners in sale deed
- Both should be co-borrowers in loan
- EMI paid from joint or proportionate individual accounts
- Ownership percentage clearly mentioned
- Maintain all documents and certificates
Quick checklist before buying with sibling
- Are both names on sale deed?
- Are both names on loan agreement?
- Are both actually paying EMIs?
- Is the property self-occupied or rented?
- Is ownership ratio clearly defined?
If the bank wants you to “add brother/sister’s name”, think beyond loan eligibility.