The Telegraph
Monday , December 3 , 2012
Since 1st March, 1999
CIMA Gallary

For wife dear

It has been proved time and again that investments in real estate can never go wrong. Buying property is perhaps the easiest and most wise investment decision you can take, one that will provide a security net over you and your family.

Even if you feel tempted when you see friends and relatives around you investing in real estate, it is important for you to understand your specific requirements and what you want to achieve from the investment. Also, you need to consider the various practical aspects of making such investments in the name of your spouse and children.

Suppose, you decide to buy a property in the name of your wife. Here are a few things you should keep in mind.

• If you wish to buy a commercial or residential property with the intention of letting it out on rent to provide a steady income to your wife, you should at once consider the income tax implications of such a decision.

• Ensure that you do not gift any money to your wife to buy the property. If you contribute money to buy a property, which is in the name of your wife, any income arising from the property will be clubbed with your income under Section 64 of the Income Tax Act. The clubbing provision will also apply if she gets the money as a gift from her father-in-law or mother-in-law.

• If your wife has no money at her disposal, she can borrow it as a loan from you or her father-in-law or mother-in-law or any person. Once your wife buys the property by taking a loan from you or others, the income arising out of that property will be treated as belonging to her only.

• Also, ensure that your wife pays a reasonable interest on the loan taken by her, especially from you or her father-in-law and mother-in-law. However, in the case of loan taken from other relatives or friends, she need not pay any interest.

• When you buy the property, make the initial payment from the funds available with your wife. Future payments can be made from the loan. If you follow this simple action plan, you are unlikely to face any hassles related to the purchase of immovable property in the name of your wife.

An investment in real estate in the name of your wife has its share of tax benefits as well.

• Your wife will enjoy a separate reduction up to Rs 1.5 lakh per annum on the interest paid for the home loan. Remember that the loan can be taken from anyone and at any rate of interest as decided by the parties.

• Likewise, one can enjoy a separate tax deduction for repayment of the housing loan under Section 80C of Income Tax Act, 1961, within the overall limit of Rs 1 lakh. However, the deduction on the repayment of the housing loan will be allowed only for loans taken from selected agencies such as the bank, the employer etc.

• Letting out a property on rent will also mean a special tax deduction of 30 per cent from the rental income. If a husband has substantial income in his name, it makes sense to buy the property for the purpose of letting it out in the name of the wife, so that such rental income is separately assessed in the hands of the latter.

From the tax planning perspective, it makes sense to buy a property jointly in the name of the husband, the wife and may be other members of the family, especially if the interest on the housing loan is a big amount. This will ensure separate income tax deduction for every member of the family on the interest as well as the repayment of the loan. Also, it is recommended to get a Permanent Account Number for your wife even if she has no income at present.

If you wish to buy a property in the name of your wife for self-occupation, there will be no income tax liability and hence, no clubbing of income. In such a situation, one should buy the property from the funds belonging to the husband but in the name of the wife. Also, you donít have to file any income tax return just because you have bought a property.

Another way to ensure the security of your family is to prepare a Will that will ensure that your spouse gets your property after you. It is recommended that all persons after the age of 50 must prepare their Will to plan a proper succession of the real estate they own.

Here are a few tips for buying a property in the name of your children.

• If your son or daughter is an adult, you can right away gift a property in his/her name. Alternatively, you can finance the full purchase or partial purchase of property taken in the name of your adult child. Income arising out of such property will not be clubbed with the income of the father or mother.

• In the case of minor children, if you gift him/her a property bought from your money, the income arising out of the investment will be treated as yours.

However, if you make such investment through a 100 per cent specific beneficiary trust in the name of the minor child, the income from such a property will not be clubbed with the income of the father or mother.

The best way to invest in real estate is to buy a plot of land in the name of your spouse or children. While there is no question of income from the plot, you will ultimately benefit from the appreciation in the price of the piece of land.

So, when it comes to property, invest today, relax and see a bright future unfold before you for your investment.

The author is New Delhi-based tax and investment consultant. He can be contacted at