If you bought a house in your mother’s name to save on stamp duty, you actually lost Rs 10 lakh because you didn’t understand one rule.
1. You bought a house worth Rs 75 lakh. You registered it in your mother’s name because the stamp duty for women is 1% lower. You saved Rs 75,000.
2. You took a loan of Rs 60 lakh for 20 years along with your mother. However, you pay the entire EMI.
3. The tax deduction of up to Rs 2 lakh on home loan interest is only available to someone who is both the owner and the borrower. Since you are not the owner, you get nothing. And since your mother has no taxable income, it is of no use to her either. The deduction is completely wiped out. This results in a loss of about Rs 60,000 every year, totaling Rs 11 lakh over the entire loan tenure.
Since the house is already in your mother’s name, here is how you can fix it:
a. Talk to the bank. Since the house is mortgaged, you need the bank’s written permission to transfer a share.
b. Decide how much share will be in your name, for example, 50%.
c. Get a gift deed made from your mother to you. Clubbing of income does not apply to a gift from a mother to a son, so the deduction becomes yours.
d. Check your state’s stamp duty rate for family gifts. It is lower in many states.
e. Get the deed registered at the sub-registrar’s office. Your mother, you, and two witnesses must go together.
f. Give the registered deed to the bank, and update yourself as a co-owner and co-borrower in the loan agreement.
g. From that financial year onwards, claim the interest deduction for your share in your ITR. Get a joint interest certificate from the bank in both names.
A few more points to note:
a. The deduction is only available from the time you get ownership, not for previous years.
b. This loss happens under the old tax regime. Under the new tax regime, no one gets an interest deduction on a self-occupied house.
c. In Delhi and Haryana, the stamp duty for women is 2% lower, not 1%.
d. If the house is in your mother’s name, it will be divided among all legal heirs after her lifetime if there is no Will. Make sure to get a Will made.
e. The Rs 60,000 savings happen for the first 15 years; after that, the annual interest component falls below Rs 2 lakh.
f. If you are buying a new house, the easiest way is to add both names right at the time of registration
Above Information is for educational purposes only, ask your financial Advisors before taking any financial decision.