Buying that dream home is among top priorities of every individual. However, big down payments and large EMIs often delay realisation of the dream. But for working couple, it becomes easier to fulfill the dream early by taking loan jointly.
Pulling of income not only makes the dream achievable early, but also have other benefits.
One of the benefits of making a woman first co-owner is reduction in payment of stamp duty, as most states charge about 2 per cent less stamp duty from women compared to male homebuyers. As stamp duty is charged on registration amount, by making a woman first joint owner, a couple may save Rs 2 lakh by paying 2 per cent less on a property of Rs 1 crore.
As loan eligibility depends on annual income of a person or joint income of persons, in case of joint purchase, a couple becomes eligible to get more loan by pulling the income. Apart from enhancing the loan eligibility, a couple may also get home loan at lower interest rate by keeping wife as first owner, as many financial institution offers home loans at lower rate to women.
“Joint ownership of properties have several direct benefits. While the two owners can claim a tax benefit, they can also claim deduction on the registration charges and stamp duty charges. The biggest benefit, however, is in terms of inheritance. In a joint ownership, the rights to the property after the demise of one owner, simply transfers to the co-owner. This often saves a possible dispute that may arise if there is ambiguity in terms of ownership. The process to execute the inheritance as per law in case of a single ownership is time consuming and involves transference. Inherited properties need to be transferred in the legal heir’s name. Legal heirs need to submit the property papers, succession and death certificates, an affidavit and no-objection certificate(s) from other legal heirs claiming their ownership. This may take their own time. Hence, otherwise, it is advisable – both in case of single ownership or joint ownership – to draft a Will that nominates a person for subsequent natural ownership,” Dr Samantak Das, Chief Economist and Head of Research & REIS, JLL India.
Another important benefit of joint ownership is enhanced deductions from taxable income. The principal amount of home loan repayment is eligible for deductions up to Rs 1.5 lakh u/s 80C, benefit of which both the partners may share if the amount of principal repayment is over Rs 1.5 lakh.
“Provisions of tax deductions on payment of home loan interest and principal are per person and not per home. So, if there are two co-owners, the deduction limit doubles,” said CA Karan Batra, Founder and CEO of charteredclub.com.
Similarly, the maximum amount of tax deductions that may be claimed on home loan interest in a financial year is Rs 2 lakh per person. So, in case the interest paid in a financial year is more than Rs 4 lakh, both the partners may claim deductions of Rs 2 lakh each, provided both the owners have taxable income and the home loan EMI is paid from a joint account, in which both of them contribute.
“Both joint owners may claim tax deductions only when both of them have source of income and the home loan EMIs are paid from a joint account held by them,” said CA Ravi Kumar Singh of RGS & Associates.
