Dr. Sunil Mehta got married after thoroughly establishing himself as a cardiac surgeon in Kolkata. He is an extremely busy man and depends on his wife to manage most of his financial affairs. After a few years of marriage, Sunil decided to make his wife a co-owner of their apartment in New Town.
Sunil was under the impression that it would not take a huge effort but a few letters to the authorities. Soon he realized that the process of adding a co-owner to a property is not so straightforward. It has a due process and has substantial cost involvement also in terms of stamp duty and registration charges, housing society charges, and bank charges (if the property is mortgaged).
Yet, Sunil was determined to make his wife a co-owner of his home in every sense and started taking the following steps to complete the process.
Adding a Co-owner to a Property
A joint owner will, by default, be the owner of 50% of the property, but you can specifically mention the proportion of the ownership between the two individuals. Here are the two ways in which you can make another person a co-owner.
- Sale deed: You can sell a portion of the property to the co-owner and register the same in his name with a sale deed duly registered with the concerned sub-registrar of the area. The stamp duty and the registration charged need to be paid as per rules.
- Gift deed: You can also gift the property to someone who is either related to you or any other person by executing a gift deed duly registered with the sub-registrar of the jurisdiction on a duly stamped deed. When you gift a property to your relative, under the purview of gift tax it is non-taxable. In case you gift it to other than relative the value of the property is treated as income and is taxed as per the income tax rule.
Benefits of Adding a Co-owner to a Property
- Co-owning the property is always beneficial because one of the co-owner either husband or wife dies, the surviving spouse automatically becomes the sole owner of the property.
- If the couple or joint owners have taken a housing loan in their joint name, each can claim tax benefit u/s 24 of the IT Act and also separately claim the tax benefit u/s 80C for repayment of principal under housing loan up to Rs 1.5 lakh each.
Adding a Co-owner to a Mortgaged Property
Banks generally don’t charge any money to just add a co-borrower to the loan. However, if you want to extend this and add a co-owner to a property, the bank or financial institution from which you have taken the loan will probably ask the co-owner to become a co-borrower as well. Banks will also ascertain his/her creditworthiness. The mortgage deed will have to be redrawn and the new joint owners will have to pay additional stamp duty and registration charges. Banks generally impose all the applicable charges, including the search and valuation, legal, administrative, and processing fees.
In the case of a property under construction, you will be able to add a co-owner only if the builder agrees. Developers generally restrict or prohibit transfers before you take possession of the house, and even if they allow, you will have to pay applicable transfer charges. However, the advantage of taking this step is that if the ownership is transferred before the sale deed is drawn, you will not have to pay additional stamp duty or registration charge.
Rights of the Co-owner to a Property
According to the Transfer of Property Act, a co-owner has a proprietary right to the entire property. So any transaction needs to be done with the consent of all the owners unless specifically mentioned in the agreement. The co-owner has full rights to decide whether to reside in it, give it out on rent, or even sell it.
Whenever the house is sold, the co-owners will have to pay tax on the capital gains earned by them. In the case of the second owner, capital gains will be computed on the basis of the market value of the house as on the date that it was sold or gifted to him.
Always consult a legal and taxation expert before adding a co-owner to a property.