Buying a house of your own is perhaps the most capital-intensive investment an individual makes in his/her lifetime. The real estate industry is observing a developing change in trend in the form of ownership houses. Home buyers are progressively more considerate towards joint ownership, since co-owning a property assures numerous advantages ranging from tax benefits to increased loan eligibility. To avail the benefits of Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (Urban), one adult female membership is required in the property ownership.
Joint ownership with a spouse, child, parent or siblings is perhaps one of the best ways to draw in multiple benefits as mentioned below:
Increased Loan Eligibility
A significant advantage of co-owning a property is improved eligibility for loans. Banks grant loans by the applicant’s monthly income and whether they would be able to cover the EMIs throughout. In case buyers apply jointly for a loan by listing themselves as co-owners, banks readily grant a higher loan amount on the joint monthly income.
Income Tax Benefits
Under section 80C and section 24(B) of the Income Tax Act, co-applicants can avail income tax deduction benefits on both principal and interest amounts. Each of the co-owners contributing to EMIs can claim minimum benefits of Rs.1.5 Lacs per year on the principal amount and up to Rs. 2 Lacs on the interest paid.
Lower Stamp Duty
Government of India is taking several steps to encourage females to own property individually or jointly. Depending on different states, the stamp duty rate on joint property is usually 1 or 2 percent lower in comparison. In Delhi for example, the stamp duty rates are 4% for women and 6% for men.
Succession Legal Hassles
The procedure of transferring a single ownership property in case of demise of the owner is a time consuming and lengthy process in India. To get the documents in the name of the successor involves strict adherence to rules and regulations which might be cumbersome. However, in case if the property is jointly owned, it becomes quite more comfortable to get the property title in the name of the living co-owner.
Tax Benefits on Rental Income
People who let out their property to earn rental income can avail further tax benefits if they co-own the property. Rental income is taxed under the head ‘House Property’. In case of joint ownership, the taxable income from rent gets divided between the co-owners in proportion to their co-ownership. Joint property proves advantageous to individuals who can make use of the basic exemption limit of tax and therefore pay zero tax on rental income.
While joint ownership promises an array of advantages, one should ensure that the co-ownership decision is taken at the time of the initial purchase itself. Transferring or gifting the property to a co-owner later for claiming benefits might come under the purview of clubbing provisions of the income tax act.