Tax on Property Purchased by Husband in the Name of Wife

The biggest benefit of putting your wife's name on a home purchase is that it may reduce the property value by 1% to 2%, potentially lowering the stamp duty and taxes. As a part of social efforts, several state governments provide women buyers with a discount on stamp duty. 

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

• One of biggest benefits in purchasing property with wife as a co-owner is the tax deduction under Section 80C. 
• Up to ₹1.5 lakh of deduction can be claimed 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.
• 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.
• The benefits of taxes on property purchased by the husband in the name of the wife will differ according to their ownership stakes.

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 property in his financially dependent wife's name, 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.