Homeowners are often unaware of the implications of buy a property or house in a single name, instead of joint names. One of my colleagues had acquired a flat in his name before marriage. After matrimony, the EMI was serviced by the couple, in some equal parts. Nevertheless, he was shocked to learn that his wife could not claim the income tax benefits on the home loan.
Who can be a joint owner of a property and land?
There is no law governs who you can add as a joint owner of a property. It can be a close relative (parents, spouse, children, brother or sister), your partner in a business, or even friends.
Even if you are funding the property alone, it makes sense to add a close relative, say, spouse or children, if you are married, or parents or a bachelor. A person, who is added as a joint owner in the contract, need not contribute towards buying a property in India.
Taking a home loan
While giving a loan, bankers insist that the joint owner is included as a co-borrower. Lenders tend to favorably consider home loan applications, wherever the co-borrower is a close relative, like parents, spouse or children. A majority of the lenders do not consider loan applications, where the co-borrower is not one of these close relatives. To buy a property as the joint buyer has to register the applicant as a co-borrower, you may not take a loan if the joint owner of a property is a partner, friend, or a brother or sister.
A smooth succession of the property
As most of the residential properties bought nowadays are apartments in housing societies, it is much better to buy a property in joint owner’s name. In case anything happens to one possessor, the society will generally transfer the property or flat in the name of the remaining joint owners, without insisting on probate or a no-objection certificate(NOC) from the other legal heirs.
Income tax benefits
The income tax benefits, whether for principal repayment of a home loan under Section 80C or interest on a loan under the Section 24b, can be claimed by the property owner or the joint proprietor of the house. Consequently, the profits of a house loan cannot be claimed by you, unless you are an owner of the property or land, even if you are servicing the home loan.
Buy a property say house today may require the least home loan of Rs 50 lakhs. The interest on this loan would be nearly Rs 4.75 lakhs per annum @ 9.50%. In such case the house property is utilized for self-residence and is owned and being maintained by you only, you will be able to claim Rs 2 lakhs, and the tax benefit for the balance Rs 2.75 lakhs will be lost. But, in case the same property is obtained in joint names and the loan is serviced by both the owners, both of you can claim the tax benefit of Rs 2 lakhs each, on the interest payment.
Furthermore, for repayment of the principal loan amount under Section 80C, if the property or land is jointly owned, and the loan is equally serviced, then, both holders will be able to claim this compensation of up to Rs 1.5 lakhs each, presuming you do not have any other expenditure or investment qualifying for Section 80C.
Before buying a property in India one must take legal advice from a lawyer. Moreover, it is advisable that one must buy a property on joint owner’s name. This will prevent unwarranted problems in the future after the demise of any person.