Tax benefits of Jointly Owning a property with Your Spouse
August 3, 2017
Joint ownership of property is a common practise adopted by many couples for a mix of tangible and intangible benefits. It can increase the sense of equality, trust and better bonding between couples apart from other financial benefits to them.
Consider the following facts regarding the tax benefits of co-ownership of property with your spouse.
1. Co-owning and Co-borrowing
To avail the tax benefits of joint ownership your spouse should be a co-borrower of home loans. He/she who co-borrows and contribute to the EMI shall be eligible for tax deductions, if you do so, both of you can individually claim the tax deductions on the interest paid on the home loans in proportion to the ratio of ownership.
2. Tax benefits only for completed property
As a general rule, tax benefits of home loans can be availed only after completion of the property. The expenses prior to the completion can be claimed from the year of completion in 5 equal instalments.
3. Deduction on the principal amount
Under Sec 80 C, both the husband and wife (who are both co-owners and co-borrowers) can individually claim a deduction up to ₹ 1.5 lakh on the principal amount taken. Moreover, even if you have not taken a loan for home purchase, you may claim the amount spent for stamp duty and registration for tax deduction in the year in which they are paid.
4. Deduction on the interest paid
As per Sec 24 of the Income Tax Act, each co-owner (who is also a co-borrower) can claim up to ₹ 2 lakhs on the interest paid on the loan, individually. This is the case of a self-occupied property and if the property is not self-occupied there is no limit for deduction i.e., you can claim the entire amount paid as interest as tax deduction.
5. Completion period is also very important
The deduction mentioned above is only applicable if the construction is completed within 5 years from the end of the financial year when money was borrowed. Failure to complete the project in the stipulated time will trim down the deduction that can be claimed on interest from ₹ 2 lakhs to just ₹ 30,000.
Additionally, some states charge a lesser stamp duty when a property is owned/ co-owned by a woman as a step towards women empowerment. However, Kerala has made no such moves so far but it’s expected that the government would initiate some steps to encourage women own or co-own properties.
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