Advantages of buying a property in woman’s name

Purchasing a property in the near future? Property purchase is a very crucial decision and every aspect of the purchase must be considered strategically to ensure that you get the best possible deal. One such important aspect of property purchase is whether you should register the property in your name or in the name of your wife or mother.

Uttar Pradesh, Delhi, Punjab and Haryana provide an exemption to women buyers on the taxes paid to the state government when you buy a property and get it transferred in their name. So if you buy a flat for Rs 1 crore in Delhi, the stamp duty for a male buyer would be Rs 6 lakh. For a married couple it would be Rs 5 lakh and for a woman buyer it would be Rs 4 lakh.This is because in Delhi a woman needs to pay a stamp duty of 4 percent compared with 6 percent for men and 5 percent for a married couple. Registration Charges at 1% of transaction value is separate.

There are certain benefits that women get when it comes to buying a house. These aren’t always apparent, but take a closer look and you will see that there are multiple advantages to buying a house in the name of a woman.

Benefits of buying a property in woman’s name

1) Property registration

While registering a property, a stamp duty is levied, and the percentage varies from state to state. Stamp duty is calculated as a percentage of the agreed value of the property or its market value, whichever is greater.

In some states, if a property is bought in the name of a woman, the stamp duty levied is lower compared with what’s applicable for a man. For instance, in New Delhi, a woman has to pay 4% stamp duty compared with 6% for a man. This is also true in case of conversion of a property from leasehold to freehold, and in case of gifts.

In some states, the stamp duty depends on the region in which a sale is executed. For instance, in Haryana, a man is required to pay 8% stamp duty in urban areas and 6% in rural areas, while a woman has to pay 6% in urban areas and 4% in rural areas.

In Uttar Pradesh,  the benefits are limited to Rs. 10,000/- only for a single woman allottee or when all allottees are women.

Jointly in name of Man and Woman: If it’s not possible to buy a property in your wife’s name, consider joint registration. In fact, some states that offer differential rates increase the rate if a property is bought jointly in the names of a man and a woman. For instance, in Delhi, such a property will attract 5% stamp duty instead of 4% for a sole female owner and 6% for a sole male owner.

2) Interest on home loan

The rate of interest levied on a home loan is lower in some cases for women. For instance, State Bank of India charges a woman customer 9.50% interest rate instead of 9.55% for other customers.

The difference in rates may not look significant, but they make a big difference if the loan amount is high. It is important to note here that financial institutions usually offer such differential rates on home loans only when a woman is the sole applicant or is the first co-applicant. Check with the lender before availing a loan.

Few things to consider before buying property in your wife’s name:

1) Tax exemptions and Rebates

If the property is purchased in your wife’s name, then there is a huge probability that the home loan is also on her name, especially as many banks clearly stipulate that the loan account be in the name of the owner of the property. In such a case, your spouse can enjoy a deduction towards interest up to Rs 1.5 lakh per year. In the same way, if the property is being rented out, then the complete interest paid towards the home loan can be claimed as deduction by her. However, you cannot enjoy any tax rebates if you buy the property in your wife’s name, and this holds true even if you are the co-applicant of the loan as even co-applicants of home loans are not eligible to receive tax concessions.

Besides, if a loan has been availed of to buy the property, you must know that the loan is always given to the owner of the house and, being a co applicant, does not entitle one to the concessions. Also the wife may not be considered an eligible candidate for a loan by housing finance companies if she does not have an income of her own.

2) Taxation

If you buy a house in your wife’s name, but she does not contribute monetarily to the purchase, the rental income from this property will be treated as your income and taxed at the applicable rate.

3) Benami Transactions

Purchasing a house in the name of the wife by applying your own funds means that you are using her as a name-lender and this is a ‘benami transaction’ and hence illegal. The only way you can make this transaction legal is by gifting the money to the wife to enable her to purchase the property in her name. But, then again, the utility of this is lost because of the clubbing provision, which requires the property income to be added to your income for income tax and its value to be added to your wealth and wealth tax.

Joint Ownership is the best way?

If it is not possible to buy a property exclusively in your wife’s name, then it might be a good idea to undergo a joint purchase and register the name of both of you. Joint ownership can be beneficial if both the spouses take home loans as each can claim tax deduction for the interest paid on loan.

Every family’s financial and personal predicament is unique and hence you must weigh the advantages and disadvantages of buying on your spouse’s name specifically for your needs and situation and then take an informed call.

2 thoughts on “Advantages of buying a property in woman’s name

  • October 20, 2015 at 6:34 pm
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    Hi,

    I recently booked an apartment in my name.
    My wife is not earning and doesn’t have any income
    Can I have registration of the house in joint names?
    Also I would be requiring some amount of loan. Even in that case, can I add her as a co-applicant.

    My major concern is saving that 1% of the stamp duty charges, if at all it is possible and there are no difficulties foreseen.

  • October 20, 2015 at 6:38 pm
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    Yogesh,

    You can add her as co-owner/co-applicant in your property. However, if she is not earning, she may not be able be a co-applicant in Loan. Also, 1% savings is not in UP and it is only in Delhi/Haryana.

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