Orchard 126 HIRA Registration No. - HIRA/P/NOR/2018/000236

Posted On July 15, 2019

4 Awesome tax benefits to enjoy on joint purchase

4 Awesome tax benefits to enjoy on joint purchase


A dream for many out there, buying a house is often looked upon as a major investment in India. Keeping up with the demand and supply in the real estate market, the government too has been adept in offering several tax benefits to house buyers. Take initiatives like “Housing for All” for instance. That brings us to a few noteworthy points which can help you earn extra benefits on tax, if you are planning to buy a property jointly. For starters, one should know that a house or an apartment can be bought jointly with almost anyone, who might not be a parent or your spouse for that matter, but can be a relative, a business associate or a friend as well. Also, it is worthwhile to consider how the Income Tax Authority has been offering several benefits for tax payers who also own a house under joint name. No matter who you are or what you do, if you are planning to buy a residential 2 BHK or 3BHK apartment, it is highly recommended that you find out several tax benefits before you invest in a property. Here’s a look at 4 such awesome tax benefits that you earn upon buying an apartment jointly.


Avail benefit of self occupied house for all owners


According to the provisions laid down by the Income Tax Act of 1961, it is all the way possible to file a claim for deduction on the interest that is paid, if there’s a loan involved. That comes right under the head of “Income from house property”. Now, in case the house or the apartment is self occupied, an individual can very well claim a moderate deduction on the interest paid on the housing loan for up to a total of 2 lakhs, in one particular financial year. If the property happens to be under joint holding, then both the owners stand eligible for deduction of 2lakh each financial year.


During the initial years when the interest on the loan is comparatively higher, quite a large amount of money can actually render unutilised owing to the cap right on deduction for up to Rs.2Lakh. In such a scenario, when joint owner is present each of the co-owner shall be available for a total benefit of 2 lakhs per year where the higher interest patterns can be put to good use. There are multiple provisions laid down by the Income Tax Authority of India that is directed to offer a string of benefits for tax payers looking to invest in buying a property. It is advised you get in touch with a professional tax consultant before you embark on your purchase.


Benefit on rental income


|Holding a property under joint name allows for great benefit to all those individuals who receive rental income on the very same property. Now, just in case one co-owner qualifies for a lower tax to be paid, both the co owners can avail benefit on the tax for the rental income received annually. Moreover, any loss from the property for an individual is capped at 2 lakh per financial year.  Hence, any loss that is more than 2 lakhs is usually carried forward to the next year. In accordance, all such co owners shall be able to incur a loss of 2 lakh per year individual against any other income head.


Benefits for investing in property

Any such capital gain that is being derived from a residential property is subjected to taxation.  According to Section 54 Income Tax Act, on purchase of a residential property maintaining certain guidelines, the amount that is invested can be substantially reduced from the capital gains (taxable). As such, Section 54 states any amount which is invested in purchasing a residential property stands eligible to be reduced from the capital gains. Moreover, if the property is held jointly, any such capital gain will be further calculated for each co owner wherein they can gain benefit and restrict any further taxation on their gains. It also accounts for the provision where each co owner is allowed to make use of some portion of the first house sale to proceed towards buying another property or apartment, within a pre-decided timeframe. In totality, this shall reduce the taxable capital gain on a whole.

Section 54EC Benefits for specified bond investment


According to section 54EC of the Income Tax Act, any individual investing in specified bonds stands eligible to claim for up to Rs. 50 Lakh on the capital gain that is being procured from selling of a residential property. Taking into consideration the real industry trends in India, a deduction of Rs.50 Lakh might be a little too short to cover all such capital gains wherein individuals will have to pay taxes upon anything that crosses 50lakh. In case, the property is being held jointly. Each of the co owners can choose to invest separately in bonds specified and avail Rs 50 lakh deduction individually. The most popular specified bonds are usually offered by National Highways Authority of India (NHAI) as well as the Rural Electrification Corporation (REC).


To summarize, when you own a house as a co owner, it entitles you to a plethora of tax benefits. However, it is necessary to know that the property in question should be funded individually by each co owners. Further, the shares of each co owner should also be definite and ready to be ascertained. As such, the income tax authority of India is increasingly working to scrutinise funding as well allocation of funds for residential properties, where it is being held under joint name and accordingly tax benefits being claimed by both owners, when one individual falls under the ambit of low tax bracket. Are you looking to buy a residential property anytime soon? Have you considered making the purchase under joint name? So drop us a line for any comment or suggestions if required. We would love to hear from you.

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