Benefits of buying a house in your wife's name
What’s the biggest advantage of buying property in your wife’s name? Pleasing her, impressing the family, being seen as a trendsetter in a patriarchal society? Yes, there is all that, but the icing on the cake is that you might shave off 1-2% of the property value. Several state governments offer women buyers a discount on stamp duty as a part of social initiatives (see graphic). Stamp duty is the tax paid to the state government when you buy a property and get it transferred in your name. In Delhi, for instance, a woman needs to pay a stamp duty of 4% compared with 6% for men.
This benefit of lower stamp duty can be availed of even when the property is gifted to the spouse. Here’s how this benefit is extended to women.
• Discount on stamp duty charges
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.
If it’s not possible to buy a property in your wife’s name, consider joint registration. Some states, including Delhi, offer a 1% discount on stamp duty in such cases. According to Mayur Shah, director, tax and regulatory services, Ernst & Young, there are some legal and tax benefits in purchasing a second property jointly with your wife. “If the wife is a co-owner, she can claim a deduction of up to Rs 1.5 lakh for the interest paid on a home loan in case of self-occupied property,” says Shah
• Discount on home loan interest rates
Many banks like SBI, ICICI and HDFC Bank, offer discounted rates on home loans for women borrowers.
• Taxation
As for wealth tax, the asset is treated as net wealth in the hands of the spouse who owns the property. To get the maximum benefit from this incentive, remember that simply registering the property in the name of the wife won’t be enough. The provisions of the domestic tax law in India, according to Shah, state that the income earned directly or indirectly by the wife from assets transferred to her will be clubbed with the income of the husband.
This means that if you buy a house in your wife’s name, but she does not contribute monetarily to the purchase, the rental income from this property will be treated as your income and taxed at the applicable rate. One way of circumventing this is to give a ‘loan’ to your wife. So, if you lend her Rs 50 lakh, she can later transfer jewellery worth this amount in your name.
• Other tax benefits
Here’s how to reduce your tax liability:
If the husband incurs business debt or loss, the house that is registered in the wife’s name cannot be attached to cover the loss.
Joint ownership can be beneficial if both the spouses take home loans as each can claim tax deduction for the interest paid on loan.
In case the husband already owns many assets, registering the house in his wife’s name will reduce his wealth tax liability.
• Things to keep in mind when buying a home in the wife’s name
Experts maintain that it is a good idea to buy a home in the name of one’s wife or in co-ownership. However, the wife can enjoy the tax benefit, only if she has a separate and genuine source of income. Moreover, if there is any legal dispute on the property, then both, the husband and wife, will be involved in the case. Therefore, home buyers should evaluate all possibilities, before making a final decision.
