The concept of “Joint Property Purchase” is being popularized by Home Loan Providers and the Govt. The objective to promote Joint Property Ownership is different for both Govt and the Home Loan Providers. State Govt’s are providing incentives in stamp duty and registration charges to empower women through Joint Ownership. In many cases, i observed that Husband is willing to include Wife as a Joint Owner only to save stamp duty. Whereas from Home Loan provider perspective, they have selfish motive to safeguard their business interest which is not wrong also. Home Loan provider first push for Joint Purchase and sell this concept by highlighting advantages. The biggest USP is increased Home Loan eligibility & Home Loan tax dedcution. Many a times even a single buyer is also eligible for required Home Loan but Home Loan Provider never reveal. Buyer never ask what will be eligibility if there is a single buyer. If buyer insist on single ownership then Home Loan provider insist on joint home loan which has more negatives then being co-owner & co-borrower. I discussed the same in my post Beware of Being a Home Loan Co-Applicant. It is critical from buyers perspective to understand the pros and cons of Joint Property Ownership. In this post, we will discuss 7 Important Points about Joint Property Purchase.
Joint Home Loan a Must
Not many buyers are aware that in case of Joint Property Purchase, all the buyers have to apply for Home Loan. It is not possible that property is in Joint name but Home Loan is availed by any of the buyer. Home Loan provider insist on Joint Home Loan for Joint Property. You must be wondering, what is the harm in same. There is no harm but it is critical to check whether all buyers are eligible for Home Loan or not. Whether CIBIL score of all the buyers is more than 750 or not. In one of my clients case, both husband and wife booked joint property. At the time of availing Home Loan, bank rejected Home Loan. The reason given was husband defaulted on credit card payment therefore has low CIBIL score of 590. Entire calculations went haywire and they lost booking amount. Secondly, as i mentioned in my post “Beware of Being a Home Loan Co-Applicant” that it is easy for Husband – Wife to avail joint home loan but in case of other combinations like Father and Son, Brother and Brother etc there are lot of ifs and buts. In short, if Joint Property Purchase is with any blood relative on Home Loan, please check the eligibility, rules and regulations first.
“Individual” Income Tax deduction benefits
There are lot of myths and misconceptions on Income Tax deduction. Most common is that Income Tax dedcution is available in proportion of ownership subject to max limit. For example, Lets take the case of Joint Property Purchase by Husband and Wife with Joint Home Loan. Property is self occupied. As per Income Tax act, income tax dedcution available for each individual is 1.5 lakh for principal u/s 80C and 2 lakh for interest component u/s 24(B). Assuming principal payment for financial year is 4 lakh and interest payment is 6 lakh. In this case both husband and wife can claim income tax dedcution of Rs 1.5 lakh each on principal component. Income tax deduction on Interest component is 2 lakh each for husband and wife. There is a misconception that each can claim only 50% of limit u/s 80C and u/s 24(B). Please note that this max limit is for “individual” even if there is Joint Property Purchase.
Another important point is that to avail income tax deduction all co-owners should be co-borrowers and vice versa. It is wise to be a co-owner and co-borrower if income tax deduction is key consideration. If there is single earning member in the family then wise decision is to opt for single ownership and single Home Loan applicant.
TDS u/s 194IA
Normally in case of Joint Property Purchase, only 1 buyer deduct and deposit TDS u/s 194IA. As i explained in my post How to deduct TDS on Property Sale u/s 194IA that each buyer has to deduct & TDS separately and deposit in proportion of ownership in property. In case of Joint Purchase i.e. 2 buyers and 2 sellers. For each installment, each buyer will submit 2 challans i.e. one each for each seller. Common misconception is that Husband can deposit on wife’s behalf and vice versa. It is not true. Another common reason given is that either of spouse does not have PAN. In this case, it is advisable to apply for PAN before joint property purchase.
Non Earning Co-Owner
It is not advisable to include Non Earning member in joint property purchase even if she is your wife. Instead of helping her, you are unknowingly creating trouble for her. This is especially true when you are availing Home Loan. In case of unfortunate event of a death of an earning member entire Home Loan burden will be on her as she must have been the co-applicant of Home Loan. In case person die without WILL or even with WILL, it take atleast a year or so to settle the inheritance issue. As i mentioned in my other posts also that wife will be one of class I heir among 3 class I heirs i.e. spouse, children and mother of deceased but Home Loan burden will be only on her shoulder. It create lot of legal implications therefore it is not advisable to include non earning member as co-owner. The best solution is to write a WILL and inherit property in name of spouse. Besides WILL, buy term insurance to cover home loan which will be discussed in next point.
Term Insurance against Home Loan
In case of joint property purchase, all co-owners should opt for term insurance in proportion of ownership in property. In this case, i am assuming that all co-owners are earning members. In case of non-earning member as co-owner as i discussed in previous point, earning member should avail term insurance equivalent to Home Loan value. I never suggest Home Loan Protection Plan to my readers which i explained in separate post. In most of the joint property purchase cases, both husband & wife avail Home Loan Protection Plan but they are not aware that in case of any unfortunate event, Insurance provider will only clear the Home Loan of deceased in proportion of ownership in property. General perception is that entire Home Loan will be cleared, which is not true. Therefore it is beneficial to opt for Term Insurance.
Legal Implications
In case of joint property purchase with blood relative excluding spouse. I suggest you to check the legal implications. I am not saying that you should not buy with your mother, father, brother or sister but beware of future legal implications. It is sensitive subject so will just quote example. One of my client Sanjay bought property in Mumbai in joint ownership with his father. Entire purchase was funded by him from the money he earned in USA for 8 years. Unfortunately his father died after 4 months of purchase. Legally his brother and sister staked their claim on his father’s share in his property. Court ruled in favour of his brother and sister under Hindu succession act. Any joint purchase with blood relative will have legal implications therefore please consult an expert before signing below dotted line.
Joint Property – A BIG Hassle
Last but not the least, in my personal opinion joint property purchase is a big hassle. You should go for it if there are any monetary gains. In many cases husbands include wife’s name just to provide financial security. It is not required because as per amendment to The Marriage Laws (Amendment) Bill 2010, any property acquired by husband after marriage by default wife will have 50% right in such properties in case of a divorce. The Marriage laws automatically provide financial security to wife. To secure wife’s interest in case of any unfortunate event, Husband can execute WILL in her favour. I personally don’t suggest joint property purchase until unless there are monetary gains.
I hope you liked the post and will take care of above mentioned 7 points at the time of joint property purchase.
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