Purchasing a house successfully after several processes is a thing of pride. However, ownership of property is never legally recognized until you have registered the property in your name. The Registration Act, 1908 is what prescribes the registration process and does not restrict the number of registered owners of the residential property to merely one.
Joint property ownership and joint registration are permitted and you will find many couples jointly registering the property in their names. This comes with financial benefits for both the spouses and includes saving money on the purchase and monetary savings in the future. This article seeks to highlight the benefits of joint registration of property and explain these benefits for your understanding.
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What are the benefits of joint property registration?
There are several benefits to having your spouse as a co-owner of the residential property. It is one advantage to strengthen your relationship by purchasing a house together and another to enjoy the financial benefits that accrue from it. These benefits are not commonly known and could make the purchase of a house more affordable.
Here are some of the benefits of joint property registration:
- If you have availed a home loan for purchasing a property, the Income Tax Act, 1961, provides benefits in the form of deductions to homeowners under the head of “Income from House Property”. Under Section 24 of the Income Tax Act, a homebuyer receives a standard deduction of Rs. 2 lakh for interest payment. Then there is Section 80C of the Act that provides a maximum deduction of Rs. 1.5 lakh for principal repayment.
- If you have availed a joint home loan with your spouse to purchase a house you can avail these tax benefits under the Income Tax Act 1961 on a proportional basis towards the payments made by both the parties.
- Also, these tax deductions should not exceed the quantum of payments made towards the principal repayment and interest.
- This is a great benefit for co-borrowers of home loans.
Stamp duty and registration benefits:
- There are several states like UP, Delhi, Haryana, Punjab, Jharkhand etc. which provide abatements or relaxations on stamp duty to women homebuyers.
- Stamp duty rates in these states mentioned above range from 5 to 7% for men and are discounted by nearly 2% for women.
- For instance, the stamp rate duties in Jharkhand for men are 7% whereas it is Rs. 1 for women. Also, the stamp duty rate for men in Delhi and Punjab are 6%, whereas, in those same states, the stamp duty rate for women is 4%.
- This proves beneficial for married couples as the wife can avail this reduction in stamp duty as a woman homebuyer.
- This benefit can be availed also when a residential property is gifted to the wife for stamp duty is payable at discounted rates on registration of gift deed.
Succession to property:
- If a married couple has joint property ownership, this type of co-ownership is called tenancy by the entirety.
- In this type of ownership, transfer of the share of property or interest in that property cannot be transferred to a third party. It can only be transferred to the spouse.
- Joint property ownership like joint tenancy with survivorship rights allows the property rights to automatically vest in the surviving spouse after the death of one spouse. This ensures that the surviving spouse need not endure the rigours of lengthy, time consuming legal procedures to receive the share of property rights and interest of the deceased spouse.
Joint property between non-couples
Increased Loan eligibility:
- For availing a loan, first and foremost you need to find out if you are eligible to avail the loan.
- Eligibility is assessed by checking your income, your credit profile, your age etc.
- This is an important factor that allows the lender to determine whether it should accept your loan application and sanction a loan to you or not.
- Having your spouse as a co-applicant can increase your loan eligibility and improve your chances of availing a loan if the spouse is an income-earning person.
- Also, some banks have lending schemes that give women loans at concessional interest rates. This is another advantage where you can avail a loan with a reduced interest rate if you have your wife as a co-applicant.
What are franking charges?
When availing a home loan to finance the purchase of a house, there are miscellaneous expenses involved other than the monthly EMI payments which the borrower pays. Franking charges is one of these charges that are hidden from buyers and levied by lenders when stamping of documents and property papers takes place.
- Stamped documents are usually ascertained as valid and stamp duty is levied by the Government (ranging from 4% to 10% of the property value) on these documents and property papers.
- There is also a registration fee levied by the Government over the registration of property documents in your names. This fee is around 1 % of the property value.
- Franking is the process of stamping the papers. When one wants to get their papers stamped, they may go to the bank or an agency where they can get their papers stamped.
- A stamp on a paper is indicative of stamp duty also having been paid. At a sub-registrar’s office franking may be undertaken to affix documents with a stamp.
- Bankers and lenders who provide this franking service levy a fee for doing so.
- For franking a document, you need a printout of the agreement or document you want to be franked.
- A franking charge can be as high as 0.1% of the property value and is deductible from stamp duty payable. Thus, if you are charged stamp duty at the rate of 4.5% of the property value, if you have paid franking charges, you need to pay stamp duty only at 4.4% of the property value.
- If the amount payable is small, then banks may ask you to pay in cash. For a larger amount, it may ask you to pay by order.
- As per RBI directive issued in 2015, a bank needs to account for stamp duty, registration fees and charges for document processing when assessing a borrower’s loan eligibility.
- This franking service provided by banks is usually only for a limited span of time in a day.
- As of 2015, an RBI directive issued by the RBI has stated that where the cost of the property is up to Rs. 10 lakh, the bank will assess the borrower’s loan eligibility taking into account the stamp duty payable, the registration fees and other document processing charges.
- When you avail a home loan or a joint home loan for purchasing a property, there may be franking charges on the loan agreement. You need to seek the break up of the miscellaneous charges charged by the lender to ascertain the franking charges charged by the lender. You also need to check whether a bank is authorized to frank documents.
What happens to joint property in case of divorce?
In cases wherein the property is held jointly by the husband and wife, the court decides upon divorce as to whom the property should be given. The decision regarding the joint property is made based on the contribution made by both the parties in buying the property. However, the burden of settling the loan availed for the purchase of the joint property lies on both parties. In several situations, the ownership of the property is registered in the name of the wife as women have several incentives. In such situations, the ownership of the property vests on the wife. Another available remedy is that the property is sold to settle debts and the remaining amount is split between the two.
Joint registration of property comes with great benefits for married couples ranging from lower taxes to an increased quantum of home loan funds for purchasing a house. Then there are also benefits when it comes to the transfer of property between the spouses. Knowledge of taxation, registration procedures and the lending options available to you will help capitalize on the benefits provided by joint ownership and joint registration.
Also, whether it is a home loan or a joint home loan, keep track and seek the reasons behind the several miscellaneous expenses that are charged by lenders for sanctioning a loan. Knowledge about these charges may help you keep them in check or find alternate options that do not prove a financial burden for you to bear.