When Manoj was planning to purchase a house in Gurgaon his accountant friend Ravi suggested he buy jointly with his wife. Although the motive behind Ravi’s suggestion was the tax implications – there can be multiple tax benefits of purchasing a property jointly with your spouse – Manoj was thrilled at the idea because this was another way of showing his love to his wife. He regretted that he himself didn’t think of it.
He also knew that with his wife being the co-owner, a succession of the property later will be smoother because otherwise, it can become a lengthy process in the case of single ownership.
This is also called co-ownership of property. Normally when you purchase a property like a house, there is a single owner. For example, if you are purchasing a house, you may purchase it in your own name. All the property papers will carry your name. All the tax-related implications will be dealt with by you and taxes will be calculated based on your financial disposition. You will be the sole owner and after you, your spouse (your husband or wife) will inherit the property and he or she may have to go through a convoluted succession process.
When you buy a property jointly with your spouse, you both have a claim over the property. The burden of the loan is shared by two people instead of one. If both spouses are earning, you can also get a higher loan because the income of both the prospective owners will be considered.
Most of the benefits accrue if one of the owners is a wife because many states give concessions and deductions on taxes when the property is being purchased by a woman.
Take for example stamp duty. This is a tax that you pay to the state government when you buy the property, and the property is transferred to your name. Have your wife’s name as the first owner. This way you can save a lot of money towards paying the stamp duty.
Different states offer different deductions on stamp duty for women property owners. If you buy a property in Delhi and if your wife is the first owner, the stamp duty that you pay is 4% instead of 6%. This can be a huge amount. For example, if your property value is ₹ 50 lakhs, you may end up paying ₹ 3 lakhs as stamp duty. Instead, if the first owner is your wife, the stamp duty will be ₹ 2 lakhs. Please keep in mind that in some states, the stamp duty may be as high as 9.5%. So, the reduction that you get with the wife being the primary owner, can be significant.
Getting a home loan for the property? There are some tax benefits you can enjoy provided the construction of the property is complete and you have availed the home loan jointly with your spouse.
For a self-occupied property, both you and your spouse (each co-owner, who is also a co-applicant in the loan) can claim a maximum deduction of ₹ 200,000 for interest on the home loan in your income tax returns. Please remember that the maximum tax deduction can be ₹ 200,000 share of your interest.
For example, if you jointly own the property with your wife or husband, and the interest you are paying is ₹ 500,000 (jointly), both you and your spouse can each claim a tax deduction of ₹ 200,000.
Also, under Section 80C, each co-owner can claim a deduction of a maximum of ₹ 1,50,000 towards repayment of principal. This is within the overall limit of ₹ 1,50,000 of Section 80C. The deduction amount will depend on how the ownership share between both the co-owners has been split. It is important to note that co-applicants who are not co-owners cannot avail any tax benefits on the home loan repayments which the primary borrower can avail.
As you can see, there are multiple beneficial tax implications if you buy your property jointly with your spouse. You pay lower stamp duty. You can also avail of deductions if you have taken a loan and you are paying interest along with your spouse. Buying a home jointly with your spouse also benefits in the long run because it makes succession easier.
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