There are a lot of benefits of buying a house jointly with your spouse, but if you ignore paperwork it may lead you to severe issues. The husband and wife might have shared money to purchase the property, however, if they have to file proper documents, they will not receive tax benefits for which they are eligible. Recently, the Bangalore Bench of the Income-tax Appellate Tribunal has rejected the plea of a couple who were trying to separately claim exemption on long term capital gains. Thus, if any couple is Buying Property jointly, please make proper documentation of all the papers.
In the case of Bangalore couple, both claimed that they have shared equally to build a house on a plot of land. Later on, the house was rented out and rental income has been equally shared between them too and they have declared in in respective tax returns. After this, the couple sold the property and claimed capital gains exemption separately, the tax department objected as the property was registered only in the name of the husband.
Here, the couple claimed that both of them had shared an equal amount of contribution to the property, the tribunal ruled that the husband only qualifies has a legal owner because the agreement is on his name. The court also marked that there is no documentary evidence which proves that wife is an equal contributor to the cost of construction. Apart from this, she was a Malaysian citizen when the property was purchased and was essential to get the permission of RBI to purchase property in India. However, her name was not mentioned in the agreement.
This incident should act as an eye opener for all the couple, especially women, who contribute their savings to purchase properties for the family but are not named as owners in the legal proceedings. Various times, home loan EMI goes from a husband’s income while the wife’s income is mainly used for the household and other expenses. The structure might seem convenient, but it is loaded against the couple decide to split. Despite her salary contributed to the effort, there is no legal proof for such contributions. Thus, if you are contributing to buy a house, make sure that you are the co-owner of the property.
As per the PwC, this ruling highlights that “co-ownership in a property can only be considered from the recitals of the relevant documents and not from any stated intention or claim made, which is legally unsustainable”.
Lastly, even if you don’t consider it legal to establish both you and your spouse own the plot of the home together, it is perfect to register as a joint owner in order to avoid any issues in the near future.
Next time, whenever you are Buying Property jointly, make sure to verify all the legal documents.