Thousands of Indians buy their dream homes every year but rarely do they save like Mr. and Mrs. Khanna. The couple straightway saved 2% of the property value, when they purchased a new home in New Delhi’s Vasant Kunj area. So what’s the catch? No bizarre deals, no raining discounts, nothing at all. Mr. Khanna just bought the property in the name of his wife. Let’s see how such a seemingly simple decision can play out when you buy a home.
Special Privileges for Women Property Buyers
In many states in India, including Delhi, Haryana, Punjab, and Uttar Pradesh, there’s a scheme that allows special incentives to women home buyers. The scheme, aimed at uplifting the social and economic status of women, offers a rebate of 2% on stamp duty charges to women property buyers. For example, right now the applicable stamp duty for a female property buyer in Delhi is 4%, whereas, it’s 6% for men. This means, the stamp duty for a property costing Rs.1 crore, would be Rs.6 lakh if the buyer is a male whereas Rs.4 lakh for women buyers. In a similar move, recently the Jammu & Kashmir government has fully waived stamp duty for women property buyers. While these policies are aimed at encouraging women to be financially stable, it also offers a great incentive to buy a home in your wife’s name.
Do Not Get Caught in the Wrong Trap
If you‘ve already formed a mental image of making profits through real estate investments in your wife’s name, you are caught in the wrong trap. Though it all sounds pretty lucrative, buying a property in the name of your spouse requires deep consideration. This is because you cannot apply your own funds to buy the property, and use your wife as a mere name-lender. If you do so, it would immediately qualify as an illegal ‘benami transaction’. Therefore, instead of jumping into making a high-value real estate investment in your wife’s name, it is crucial to think about the provisions of the Income-tax law.
Is There a Way Out?
Definitely, yes. But to reap the fruits of property investments in the name of your wife, there has to be a solid income-tax strategy in place.
Reduced Home Loan Interest Rates
Many banks including the State Bank of India, Punjab National Bank, HDFC, and ICICI, and have started offering women-friendly loan schemes with cheaper interest rates. For instance, a woman can avail home loan at an interest rate of 8.5% – 9.15%, 8.55% – 9%, and 8.45% – 8.95% from HDFC Bank, ICICI Bank, and the State Bank of India respectively. For male borrowers, the interest rates for an equivalent amount of loan will be 8.55% – 9.2%, 8.6% -9.05%, and 8.5% – 9% from the same banks. These discounted rates are applicable even if the woman is a co-applicant.
Besides lower interest rates, banks and financial institutions (FI) have also relaxed eligibility norms and reduced processing charges on loans for women. (Note that these features depend on a bank or FI’s norms which may be changed from time to time.)
Women Buyers Get Preference Under PMAY
For home buyers in the middle income group (MIG) segment under Pradhan Mantri Awas Yojna (PMAY), it’s mandatory for a family to have at least one woman member registered as the owner of a new home under the program. Apart from this, women borrowers are also eligible to avail an interest rate rebate on a home loan under PMAY, which is now attached to Credit-linked Subsidy Scheme (CLSS). CLSS allows women buyers to get the benefits of interest subsidy on their home loans. Thanks to these benefits, the number of women applicants under PMAY have shot up by 6% over the last two years.
Things to Remember Before You Buy a Home in Your Wife’s Name
- If you are a working couple, and you have clubbed your incomes to buy the property, then the rental income earned from the property will be taxed separately.
- If the property is registered in your wife’s name, who is a housewife, and has not made any monetary contribution in buying the property, then the income from rent will be considered as your income and taxed accordingly. Offering your wife a loan against her jewellery can save you from the rental income getting added to your individual taxable income.
- If you are serious about real estate investments in your wife’s name, it is recommended to consult an expert financial adviser before making any purchase.
- Property purchases in your wife’s name are not just a way to save money; it also opens up an avenue for financial security for your spouse in old age.
In current times, the government rules are becoming stringent regarding source of income and property titles. So while buying a home, it’s advisable to have a clean financial record of the money that’s going to be invested in the property. While it’s definitely a good time for women buyers to enter the property market, it makes the best sense to buy a home in your wife’s name when she has an accountable source of income.