Benefits of Joint Ownership of a House Property
Any property which one buys can be bought in your single name or can be bought jointly with other persons. There are no restriction as to the number of persons who can become joint owner of a property to be purchased. The person with whom buy can buy property jointly can be your relatives or even non relatives. There are monetary as well as non monetary benefits of you buying a property in joint names. Let us discuss it in detail.
Enhanced home loan eligibility
While considering your home loan eligibility, the lender restricts it to certain percentage, ranging from 75% to 90%, of the market value of the property being financed. The market value is determined by an independent valuer appointed by the lender. There is also a secondary criterion considered by the lender while determining the overall home loan eligibility and which your repayment capacity assessed on the basis of your income.
So in case you buy a house of large value than what is warranted by your income levels, you can make certain of your close relatives to join as co-borrowers. In case the property is purchased in joint names, all the joint owners become co-borrower by default and thus help you in enhancing your overall home loan eligibility. Though all the joint owners become co borrower by default but the reverse is not true and you can add any one as co-borrower without he or she being joint owner of the property.
As per income tax laws when a property is owned by more than one person and their respective shares in the property are defined, they are treated as joint owners and instead of being taxed as association of persons, their share of income in such property is to be included in their total income. So in case of home loan, each one of the joint owner is entitled to claim the tax benefits in respect of his share in the property as if it is his individual. For home loans, tax laws allow you two separate deductions. The first one is in respect of home loan repayment under Section 80 C along with other eligible items upto Rs. 1.50 lakhs every year for all the house properties taken together.
The second benefit is under Section 24(b) in respect of interest paid on money borrowed for buying a property. Deduction in respect of interest is computed with reference to each of the property owned by you. For self occupied property this claim is restricted to two lakhs rupees in a year. For properties let out and in case where more than one properties are self occupied, other properties which is opted to be treated as self occupied, you can claim the full tax benefits for home loan interest in respect of each of the properties.
As per the changes brought out by budget of 2017, though you are allowed to claim interest on any number of propertied and full interest in case of let out properties, you are not allowed to claim a set off of loss under the head “Income from House propertied beyond 2 Lakhs and the unabsorbed loss of the year can be carried forward for set off against positive income under the same head in eight subsequent years.
So in case you purchase a property in joint names, each of the joint owners can claim both the deduction upto the maximum amount permissible and thus make owning a property in joint name tax friendly. So in case of a self occupied property in stead of claim of three and half lakhs for single ownership you can claim seven lakhs if case the same is purchased in two names.
In the light of high prices of properties in urban areas and most of the house purchases being financed though home loan, unless the property is bought in joint names the amount paid towards repayment and interest will not be fully available for tax claims and will overflow the eligible amount.
In case of Will made by any Hindu including Jain, Sikh and Buddhist residing in any of the local jurisdiction of High court of Bombay, Chennai and Kolkata or in respect of properties situated in these places, you have to approach a court to get the Will probated.
Obtaining a probate from a court is costly and time consuming matter. Most of the houses are presently in the apartment forms governed by cooperative laws. In case death of one of the joint owners, the property gets transferred in the name of surviving members in case of flats in housing society and thus helps avoid the hassles involved with obtaining a probate from a court.
It may be noted that just because the house gets transferred in the name of the surviving joint owner, does not mean that the joint owner gets the absolute ownership of the property. The legal heirs of the deceased still do have the rights to claim the property and the joint owner is under an obligation to account for the same to the legal hairs.
Stamp Duty and home loan interest rates concessions
Some of the state governments grant stamp duty concessions for property purchases if the sole or the first holder of the property is a women. Likewise many home loan lenders grant home loans to woman borrowers at concessional rate of interest if she is first holder or sole holder.
Though you get the stamp duty and interest rate concessions for home loan if the property is purchased in the sole or first name of your wife, this should not be the sole criteria for you to buy the house property jointly with her.
So now it is apparent that buying a house property in joint name makes more sense than going solo in this matter.