Announcement

Collapse
No announcement yet.

Benefits of buying a house in your wife's name

Collapse
X
Collapse

Benefits of buying a house in your wife's name

Last updated: April 3 2019
26 | Posts
3885 | Views
  • Time
  • Show
Clear All
new posts

  • Benefits of buying a house in your wife's name

    Property purchased in your wife’s name might entitle you to a 1-2% discount on the applicable stamp duty.



    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.

    Empowering women

    According to Naushad Panjwani, executive director of Knight Frank India, the aim of this initiative is to empower women. With more assets in their name, the economic status of women in India can improve, which in turn can make them less vulnerable to exploitation. “In many northern states, there is an imbalance in the ratio. This is the ratio of male to female population, with the national average being 914:1000. So this discount was started to incentivise women property owners,” explains Panjwani. This is not a one-time deal and applies to all subsequent property purchases.

    However, far from being an economic leveller, this incentive is being exploited for trading purposes. “Nearly 75% of all transactions involving women buyers are for trading. The male members buy a property and get it registered in the woman’s name to benefit from the 2% lower transaction cost. Then they resell the property for a profit within a short span of time,” says Panjwani. It’s a good strategy because even a small percentage saved in a speculative transaction makes for a good deal.

    Joint property

    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 1.5 lakh for the interest paid on a home loan in case of self-occupied property,” says Shah. If the property is let out, the entire amount of interest can be claimed by both husband and wife. “In case the husband incurs business debts or losses, any property registered in the wife’s name cannot be attached to cover such losses. Also, after the demise of one spouse, the other automatically becomes the sole owner of the property,” he adds.

    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 50 lakh, she can later transfer jewellery worth this amount in your name.

    However, before you decide to buy the next property in your wife’s name, remember that home loans can also be a deciding factor. Banks typically insist that the property be in the name of the person who is applying for the loan. “This means that if the husband is the sole earning member in a family, it may be difficult to get the property registered in the name of the wife,” explains Panjwani.










    Article Window
    Last edited April 3 2019, 10:21 AM.
    Please read IREF rules | FAQ's
  • #2

    #2

    Re : Benefits of buying a house in your wife's name

    This could make divorce much much riskier.

    Comment

    • #3

      #3

      Re : Benefits of buying a house in your wife's name

      Excellent, descriptive post! Point well taken!

      Comment

      • #4

        #4

        Re : Benefits of buying a house in your wife's name

        Nice post.

        Comment

        • #5

          #5

          Re : Benefits of buying a house in your wife's name

          Made a note on this.

          Comment

          • #6

            #6

            Re : Benefits of buying a house in your wife's name

            Good read, already implementing

            Comment

            • #7

              #7

              Re : Benefits of buying a house in your wife's name

              Tax aspects of property investment

              I was reading a nice article by Mr Subash Lakhotia,renowned tax expert and since it is quite informative it is appended below for information of all:

              Investment in real estate is cherished by all, for it cannot become bad. This is especially good for married people with children. However, if you are contemplating to make investment in real estate, please do remember the practical aspects. Your situation and requirements may not match those of your friends, relatives, etc.
              To being with, screen your requirement of real estate. You should also be very clear about the investment objective. Once you decide for an investment for at least a decade, examine the various aspects of the investment made in the name of your wife and children.

              The most important point which requires consideration before making an investment in real estate in the name of your wife relates to income tax. The single most important point relates to the mobilization of funds. Ensure that you do not make any gift of money to your wife to buy the property. For if you contribute money for the purchase of property in her name, the provisions concerning clubbing of income would apply. This is because of the provisions contained in Section 64 of the Income-tax Act, 1961. If a married lady receives any gift from her husband, father-in-law or mother-in-law, the income arising from the said property in her name will be compulsorily required to be clubbed with the income of the husband.

              So, if the property is purchased in the name of the wife with the funding made available by the funds given by the husband, father-in-law or mother-in-law of the lady, the rental income will be compulsorily required to be added with the income of the person who has made the gift. This is even if the rental income is in the name of the wife. The way out is to buy the property in the name of the wife. Or, if the wife is short of money, she can borrow it from the husband, father-in-law, mother-in-law or any other person.

              Once the property is purchased in the name of the wife using the loan from the husband, father-in-law or the mother-in-law, the income arising from that property will be treated as belonging to the wife only. Do remember that some reasonable interest should be paid by the wife. However, she is allowed to take loan from others without paying any interest.

              The investment made by your wife will enjoy separate independent reduction in respect of interest on the housing loan to the extent of Rs 150,000 per annum. She will also enjoy a separate tax deduction in respect of repayment of the housing loan in terms of Section 80C of Income Tax Act, 1961, within the overall limit of Rs 100,000. However, the deduction in respect of repayment of the housing loan is permissible only in the case of loan taken for the house from selected agencies like banks and employers. It is also possible for a couple to buy a single property jointly.

              However, from the perspective of tax planning, it always makes sense to buy the property jointly in the name of the husband, the wife and other members of the family in a situation where the interest on housing loan is a big amount. The purpose of adopting this strategy is to ensure a separate income-tax deduction for every member of the family in respect of interest on housing loan as well as on the repayment of the housing loan. Also, it is recommended that whenever you want to buy a property in the name of your wife, especially when she has no income and wealth of her own, it is better obtain her Permanent Account Number or PAN. For all those who are interested in buying property in the name of the wife for the purpose of financial security, even if the property is purchased in her name with 100 per cent funds made available by the husband, the provisions relating to clubbing of income under Section 64 would become ineffective, as there would be no income from the property. This is particularly helpful if you are buying your first property.

              If one obtains a PAN in one’s wife’s name, buys property in her name and she has no income, is she required to file the income tax return? Remember that merely having a PAN does not make one liable to file the return if does not have an income. If your objective is to provide permanent security to your wife, along with fixed income, you should think of going in for a commercial or residential property in the name of your wife with the object of renting it out. The rental income received from such property purchased in the name of the wife will be her rental income if you follow the guidelines mentioned in earlier paragraphs.

              Letting out property will bring a secured rental income for your wife; it would also mean a special tax deduction of 30 per cent from the rental income of your wife, thereby resulting in lower income tax liability. If you have a substantial income, it makes a sense to buy property for the purpose of letting it out in the name of your wife so that such rental income is separately assessed in her hand and suffers lower income tax deduction.

              The security of your wife in the years to come through real estate in her name can also be done with the concept of preparation of a Will whereby the succession can be unambiguously arranged in her favor. In any case, a Will is recommended for all persons over 50, as it smoothens succession in general.

              Just like making a real estate investment in the name of your wife, you can do the same for your children. If you have major children, you can immediately gift away your existing property, finance the full or partial purchase in their name; the clubbing provisions would not apply. Every family should buy at least one property in the name of some family member. It is a difficult proposition but it can be done with some determination.
              Money Mantra English Magazine

              Comment

              • #8

                #8

                Re : Benefits of buying a house in your wife's name

                quite confusing ..

                In the same paragraph, the author is mentioning two contradictory things .

                So, if the property is purchased in the name of the wife with the funding made available by the funds given by the husband, father-in-law or mother-in-law of the lady, the rental income will be compulsorily required to be added with the income of the person who has made the gift. This is even if the rental income is in the name of the wife.

                The way out is to buy the property in the name of the wife.

                Comment

                • #9

                  #9

                  Re : Benefits of buying a house in your wife's name

                  property inname of wife

                  Originally posted by RealTechNcr View Post
                  quite confusing ..

                  In the same paragraph, the author is mentioning two contradictory things .

                  So, if the property is purchased in the name of the wife with the funding made available by the funds given by the husband, father-in-law or mother-in-law of the lady, the rental income will be compulsorily required to be added with the income of the person who has made the gift. This is even if the rental income is in the name of the wife.

                  The way out is to buy the property in the name of the wife.
                  What is meant is that property purchased out of money gifted by husband,MIL or FIl does not make the income out of the house(rent) the income of the wife.it just remains income of the FIL/MIL or husband.
                  but if wife takes loan from FIL/MIL or husband the income(rent) which is generated will be her own income accounted for separately.

                  Comment

                  • #10

                    #10

                    Re : Benefits of buying a house in your wife's name

                    Be careful!!!!
                    https://www.indianrealestateforum.co...ad-law?t=32431

                    Comment

                    Tags: None
                    Have any questions or thoughts about this?
                    Working...
                    X