For working couples, buying and owning that dream home jointly would provide a windfall of tax savings. Not only on repayment of home loans, joint owners may avail tax benefits even on income generated from the house property.
Apart from the cost of the property, buying a home involves several taxes and duties, which may go up to 15-20 per cent of the total expenses, depending on the state and area in which the property belongs as the Stamp Duty varies from state to state.
Along with Stamp Duty, which varies between 5 and 7 per cent, other taxes and duties involve Registration Charges of 1 per cent, GST of 12 per cent on under-construction properties and even TDS of 1 per cent, which the buyer has to deduct from the payment of over Rs 50 lakh to be made to the seller. In case of affordable housing, the rate of GST, however, is 8 per cent and the proposal is there to reduce the overall GST to 5-8 per cent. As GST is not applicable to houses having completion certificates, purchasing ready-to-move-in property would help you save a lot.
After purchase, along with the home loan EMI, if any, Property Tax has to be paid every year, which also varies from state to state, city to city and area to area. In case the property is put up for rent, tax on income from house property has also to be paid.
Through joint ownership of a house, taxes may be saved under the following heads:
Interest on Home Loan: The joint owner may claim deductions up to Rs 2,00,000 each on interest paid on home loan taken to purchase a self-occupied property. So, together a working couple having taxable incomes may save taxes by availing Rs 4,00,000 deductions in a financial year.
Principal Repayment: The working couple may also avail deductions up to Rs 1,50,000 each u/s 80C by dividing the principal amount of the home loan repaid in ownership ratio of a self-occupied property in a financial year.
Stamp Duty and Registration Charges: The working couple may also avail deductions up to Rs 1,50,000 each u/s 80C by dividing the expenditure made in paying Stamp Duty and Registration Charges in ownership ratio in that financial year.
Income from House Property: The couple may divide the rental income from the jointly-owned property in the ration of ownership that would help in sharing the tax liability, which otherwise would put a single owner in a higher tax bracket.
To make is clear that both are paying to acquire the house, the working couple should preferably pull their income in a joint account and pay back the home loan from that account. Else, claiming tax benefits together may become a problem.
Apart from the above benefits, first-time home buyers may claim additional deductions up to Rs 50,000 from their taxable income u/s 80EE, provided the loan amount is up to Rs 35 lakh and the value of the property is within Rs 50 lakh.