Tax on Property Purchased by Husband in the Name of Wife

What is the biggest benefit of putting your wife's name on a home purchase? Well, you may reduce the property value by 1% to 2% to save tax.

As a part of social efforts, several state governments provide women buyers with a discount on stamp duty. When you purchase a property and have it transferred into your name, you must pay stamp duty to the state government. 

So what are the benefits of having a property purchased by husband in the name of wife? Let’s discuss this in detail.

Income Tax Benefits for Husbands Purchasing Property in the Name of Wife

There are several tax benefits to purchasing a home with your wife as sole owner or co-owner. One of them is the tax deduction under Section 80C. It includes income tax deductions of up to ₹1.5 lakh every financial year on principal repayment for a home loan. 

Both you and your wife can claim this benefit if you are both co-owners of the same property and your wife has a separate source of income. The benefits of taxes on property purchased by the husband in the name of the wife will differ according to their ownership stakes.

Both you and your wife can also deduct the entire amount of interest paid on a house loan if the purchased property is rented out. Both of you can also claim deductions up to ₹2 lakh for interest payments on your home loan if it self-occupied property. 

Lower Rate of Interest on Home Loans

If you take out a home loan in your wife’s name, banks and financial institutions may reduce the interest rate by up to 1% p.a. However, the amount of this reduction varies from bank to bank, so you should ask your lender about it. Given below is a chart showing differences in interest rates on home loans for women and others.

Reduced Stamp Duty

In India, various states reduce women's stamp duty payments by up to 3% if they buy a home in their name. Given below is a chart of stamp duties in different states of India for women and men applicants.

Can a Husband Take a Home Loan on a Wife's Property?

A husband can take a home loan on his wife's property only if he is a co-owner of that property. Then, he can be the sole borrower or a co-borrower of that home loan.

Tax Implication

The taxpayer should be aware of the applicability of clubbing provisions. Under clubbing, the income earned by both husband and wife will be clubbed and taxed in the hands of the spouse with the higher income. Therefore, if a husband purchases a house property in his wife's name and the wife is a dependent with no income of her own, then any rental income from such a property will be clubbed and taxed in the hands of the husband. 

Conclusion

According to various financial experts, it is a good choice to purchase a home with your wife as a co-owner or the sole owner. However, she will be able to avail the tax deductions and stamp duty benefits only if she has a separate income source. 

Before you make the decision to buy a house or avail a home loan, you should calculate the applicable tax benefits. Another thing you should know is that your wife will have the same legal obligations if any dispute arises.