Buying a property for investment? Well, make sure you buy it in your wife's or daughter's name if you want to save money, as some states provide relief in the form of lower stamp duty rates for women buyers.
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 7 lakh. For a married couple it would be Rs 6 lakh and for a woman buyer it would be Rs 5 lakh.This is because in Delhi a woman needs to pay a stamp duty of 5 percent compared with 7 percent for men and 6 percent for a married couple, Mudassir Zaidi, regional director at KnightFrank told Firstpost.
However, this social initiative aimed at empowering women buyers, is now being used for speculative trading purposes. Since the property is registered in the name of a close family member (wife or daughter), the buyer has control over the property and hold its for two to three years before selling it. "Nearly 75 percent of all transactions involving women buyers are for trading. The male members buy a property and get it registered in the woman's name to benefit from the 2 percent lower transaction cost. Then they resell the property for a profit within a short span of time," an Economic Times article said today, quoting Knight Frank Executive Director Naushad Panjwani.
Secondly, the source of funding for purchasing the property is very important. For example, if the property is registered in the name of the wife or daughter who is not employed and you are planning on letting out the flat, rental income from this property will be treated as the husband's income and taxed at the applicable rate.
Moreover, 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.
However, according to this report, there does exist a loophope in the clubbing provision. If you want to buy a house in your wife's name but don't want the rent to be taxed as your income, you can loan her the money in exchange for her jewellery of the same amount in your favour. Then the rental income from that house would not be taxable to you.
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.
Updated Date: Dec 20, 2014 12:13:26 IST