Tax benefits of buying a home in the wife’s name.
We in Vaasa Ventures believes that every Citizen in the country should be aware and take full advantage of Tax benefits. And our Experts explain that some of the obvious tax benefits of buying a home in the wife’s name, include an extra deduction of interest up to Rs 1.5 lakh every financial year, if the house is self-occupied. If a husband and wife are the joint owners of a property and if the wife has a separate source of income, then they can both claim tax deductions individually. The tax benefit will depend on the ownership share of each co-owner.
Several state governments in north India are now offering a partial waiver on stamp duty, for buyers registering properties in a woman’s name – either as a sole owner or as a joint owner.
“You can save 1%-2% on stamp duty, if the property is in a lady’s name. In Delhi, the stamp duty rate is 4% for women, compared to 6% for men. Moreover, if you are undergoing some financial setback and have some debts to repay, the property held in your wife’s name, does not come under the cover for your loss,” points out Sushil Raheja, CEO of Raheja Homes Builders & Developers.
Advantages of married couples jointly owning property
In addition to making an informed decision, property buyers are also working out the best mode of acquiring their immovable assets. Whether it’s choosing the best financing option for tax benefits or directly dealing with the seller to avoid brokerage, Indians are leaving no stone unturned. One such smart way is the decision to register the property jointly, with the spouse.
While being aware of the intangible benefits of joint registration ie. – Elevation of the status of the wife in a patriarchal society, – better bonding, – long-term commitment and trust between spouses, – easier transfer of property to the surviving spouse.
However, not many are aware of the financial advantages.
Affordability while buying a property.
The budget to purchase property is determined by the loan eligibility, which is specific depending on income. In case of a joint registration, spouses can opt for a joint home loan. Apart from sharing the debt it enables you to go for a higher loan amount as both incomes will be considered. A joint home loan can be obtained by an applicant along with spouse, parents or even siblings.
Tax benefit on property
According to Suraj Nangia, Partner, Nangia & Co., “From a taxation point of view, a joint home loan is beneficial to all co-borrowers who can claim a tax deduction of Rs 1.50 lakhs for principal repayment under Sec 80C and Rs 2 lakhs for interest payment under Sec 24. In the case of two or more people taking a joint home loan, each of them can enjoy tax benefits under the Income-tax Act, in respect of the principal and interest paid during a year, on a proportionate basis.”
In the case of single ownership, transfer of property can be lengthy and time consuming process. For instance, after the death of a New Delhi resident, his family members found that the flat they lived in, was solely owned by the deceased. The procedure to get the documents in the successor’s name involved excessive conformation to regulations and rules.
“Many suggested shortcuts involving unethical practices. Finally, my sister took possession of the property after extensive paperwork, mental torture and time,” recounts the brother-in-law of the deceased.
If the property is jointly owned, these hassles can be avoided. As most residential properties purchased nowadays, are apartments in housing societies, it is better to buy in joint names. In case anything happens to one holder, the society will generally transfer the flat in the name of the remaining joint holders, without insisting on a probate or a no-objection certificate from the other legal heirs.
“Joint registration of property is always advisable as the spouse is automatically the successor. This will prevent unwarranted problems in the future after the demise of any person,” explains advocate Narendra Vishnu Sankpal, RV Sankpal & Associates.
Is there a law governing joint ownership.
There is no law that governs who can be a joint owner. It can be a close relative (spouse, parents, children, brother or sister), your partner in business, or even friends.
Even if you are financing the property alone, it makes sense to add a close relative, like spouse or children if you are married, or parents in case you are a bachelor. A person, who is added as a joint owner in the agreement, need not necessarily contribute towards the purchase of the property.
Income tax benefits
The income tax benefits, whether on repayment of the principal or interest of a home loan under Section/s 80C & 24b respectively, can only be claimed by the owner or joint owner of the house. The benefits of a home loan cannot be claimed by anyone even if the loan is being serviced by them, unless they are an owner or joint owner of the property.
For example, on a home loan of Rs 50 lakhs. Interest would be around Rs 4.75 lakhs per annum @ 9.50%. If property is for self-residence, and the loan is being serviced by one person only, they can only claim a tax benefit of Rs 2 lakhs, no tax benefit can be claimed for the balance Rs 2.75 lakhs that has been paid. However, in case the same property is purchased in joint names and the loan is serviced by both the holders, each can claim a tax benefit of Rs 2 lakhs, on interest repayment.
Similarly, for repayment of the principal amount under Section 80C, if the property is jointly owned and equally serviced, then, each can claim a benefit of up to Rs 1.5 lakhs, presuming they have no other investments or expenditures qualifying for exemption under Section 80C.
Experts maintain that it is a good idea to buy a home in the name of one’s wife or in co-ownership, only if she has a separate and genuine source of income. Moreover in the event of legal dispute on the property both will be involved in the case. Therefore, home buyers should evaluate all possibilities, and make an informed decision