Tax planning for second property
This query is : Open
31 May 2012
Experts please reply to my query:
I have a existing house in which co owners (percentage not defined)are myself and my wife respectively. This property is currently self occupied by us.
Now i intend to purchase another residentail flat and i have to decide in whose name i have to do registration for this property. I am thinking of doing registration in my name only. My thinking is : Till intrest component of new flat is on higher side i can avail full interest deduction against my salary. and when after yrs interest component goes down i will transfer my 50% share of current house to my wife so that she will become the absolute owner of current flat and i will be the absolute owner of new flat and both property can be exemplted from income tax as well as wealth tax. Wife will claim current property as self occupied and i will claim new property as self occupied. PLS SHARE YOUR VIEWS WHETHER MY THINKING IS CORRECT ALSO POINT ANY DISADVANTAGES IN SUCH PLANNING.
I have a existing house in which co owners (percentage not defined)are myself and my wife respectively. This property is currently self occupied by us.
Now i intend to purchase another residentail flat and i have to decide in whose name i have to do registration for this property. I am thinking of doing registration in my name only. My thinking is : Till intrest component of new flat is on higher side i can avail full interest deduction against my salary. and when after yrs interest component goes down i will transfer my 50% share of current house to my wife so that she will become the absolute owner of current flat and i will be the absolute owner of new flat and both property can be exemplted from income tax as well as wealth tax. Wife will claim current property as self occupied and i will claim new property as self occupied. PLS SHARE YOUR VIEWS WHETHER MY THINKING IS CORRECT ALSO POINT ANY DISADVANTAGES IN SUCH PLANNING.
31 May 2012
Net Annual Value in respect of your 50% Share of current House is taxable in your hand as deemed let out property, if you show the new property as your Self Occupied House.
.
Analyse the option to show the New Property as Let Out. You Will Get 30% Deduction from the Net Annual Income of the Property.
It has one more Added Advantage. Your claim of interest will not be limited to 1.50 lac only.
.
If you transfer the current house to your wife without receiving Adequate Consideration for the same, still the income in respect to your share will be taxable in your hand as in that you will be treated as deemed owner.
.
So in my view, you may continue with 1 and
1/2 .
.
.
Analyse the option to show the New Property as Let Out. You Will Get 30% Deduction from the Net Annual Income of the Property.
It has one more Added Advantage. Your claim of interest will not be limited to 1.50 lac only.
.
If you transfer the current house to your wife without receiving Adequate Consideration for the same, still the income in respect to your share will be taxable in your hand as in that you will be treated as deemed owner.
.
So in my view, you may continue with 1 and
1/2 .
.
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31 May 2012
Dear Sir..Thanks for your quick reply.
Request to clarify few doubts:
1. Current property has joint ownership (myself and wife without any definete share) and for new property i decide to do registry in my name:
so till yrs when intreset component for 2nd property is high i will treat new propert as deemed t be let out so that i can setoff whole interest components.
Then when after yrs interest component is not that beneficial, i will trf my current property 50% share t wife so that myself and wife will be absolute owner of single property and not attract any taxes/ wealth tax.
But as u mention trf of share without consideration t wife will still make me deemed owner of current 50% property...Is there any way to deal this?
2. I need to do registration and decide upon ownership..pls advise whetehr i should go with my name only or jointly with wife for new property to be registered?
Additional Info: My wife is currently working but may discontinue after 4 yrs. Rental value of current property is much more then new property.Loan benefit of current property is now negligble and can be ignored.
Thanking you for your support
Request to clarify few doubts:
1. Current property has joint ownership (myself and wife without any definete share) and for new property i decide to do registry in my name:
so till yrs when intreset component for 2nd property is high i will treat new propert as deemed t be let out so that i can setoff whole interest components.
Then when after yrs interest component is not that beneficial, i will trf my current property 50% share t wife so that myself and wife will be absolute owner of single property and not attract any taxes/ wealth tax.
But as u mention trf of share without consideration t wife will still make me deemed owner of current 50% property...Is there any way to deal this?
2. I need to do registration and decide upon ownership..pls advise whetehr i should go with my name only or jointly with wife for new property to be registered?
Additional Info: My wife is currently working but may discontinue after 4 yrs. Rental value of current property is much more then new property.Loan benefit of current property is now negligble and can be ignored.
Thanking you for your support
31 May 2012
1. Till you follow this line, it's ok.
Show the current property as SOP.
.
2. You may transfer the property for an adequate consideration to avoid the provisions of Section 27(i) come into play.
This can be done if your wife has got surplus funds or possibility of having it.
However, due consideration may be given to Stamp Duty applicable.
.
3. Till DTC comes wait & watch. You have got enough time than the Finance Minister.
.
Show the current property as SOP.
.
2. You may transfer the property for an adequate consideration to avoid the provisions of Section 27(i) come into play.
This can be done if your wife has got surplus funds or possibility of having it.
However, due consideration may be given to Stamp Duty applicable.
.
3. Till DTC comes wait & watch. You have got enough time than the Finance Minister.
.
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01 June 2012
Dear Sir..Thanks for your reply.
I am aware that i need to pay stamp duty on 50% share to transfer the same in wife name.
1. Will DTC have impact on my decision..how?
2. Actually sir, i need to take decision at earliest as builder is forcing hard to do registration.
As per current situation and all other factors, do you think it is advisable for me to book new property in my name only or to book it in my and wife name?
I am aware that i need to pay stamp duty on 50% share to transfer the same in wife name.
1. Will DTC have impact on my decision..how?
2. Actually sir, i need to take decision at earliest as builder is forcing hard to do registration.
As per current situation and all other factors, do you think it is advisable for me to book new property in my name only or to book it in my and wife name?
01 June 2012
Dear Sir..Pls reply above query
02 June 2012
SALE THE 50% RIGHTS IN OLD HOUSE TO WIFE. CAPITAL GAIN FROM THIS TRANSFER WILL BE EXEMPT, SUBJECT TO FOLLOWING CONDITIONS STIPULATED U/S. 54. iF NECESSARY WIFE MAY AVAIL LOAN.
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02 June 2012
You may transfer the 50% share in current house to wife by way of sale. Transfer without consideration will attract clubbing provision (sect. 64). if necessary wife may avail loan and can claim deduction of interest u/s. 24 and repayment of loan u/s. 80C in her return .
Capital gain in your hand will be exempted subject to conditions u/s.54, as you are investing amount for purchase of new house within the period of two years. Against loan raised by you interest and repayment will be allowable as deduction u/s. 24 & 80C respectively.
Capital gain in your hand will be exempted subject to conditions u/s.54, as you are investing amount for purchase of new house within the period of two years. Against loan raised by you interest and repayment will be allowable as deduction u/s. 24 & 80C respectively.
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02 June 2012
if i do registration of new property jointly with wife and continue to claim income tax benefits claming this property as deemed to be let out and availing full interest deduction till yrs intereset component is high.after yrs interest will be negligble then my wife will transfer 50% share in new property to my name and in consideration i will transfer 50% share in old property to my wife name. so that i will be single owner of new property and wife will be single owner of old property and both property will be exempted from income as well wealth taxes...pls tell whether i am correct?...what stamp duty / registration i have to bear in this case?
04 June 2012
If wife can arrange funds on her account for purchase of new property under the circumstances you may purchase the property as co-owner and claim deduction of interest and repayment in proportion. In future, transfer of share to each other will attract capital gain in hand of both the co-owners from transfer of respective shares to each other, and benefit of sect. 54 will depend on value at time of transfer. capital gain will attract in the hand of transferor of share in property having higher value. Registration charges will attract.
04 June 2012
So to conclude, which option is better:
Option One: Registering new property in my name only: I will claim this new property as deemed to be let out and will set off full interest against my salary till interest component is high. Now after years when interest will be negligible, I will transfer 50% share in current house to my wife. Now I will be absolute owner of new property and my wife will be absolute owner of existing owner and both property will be exempted from income tax, wealth tax. I will be required to pay 50% stamp duty for this transfer and also transferring 50% share without consideration will still make me deemed owner of existing property. But I will try to show some consideration or will transfer at market value to avoid capital gain. Please evaluate this option?
Option Two: Registering new property jointly with wife: I will claim this new property as deemed to be let out and will set off full100% interest against my salary till interest component is high. Will I be able to take benefit of full interest though I am 50% owner? I will be paying full EMI and interest and will I be able to claim 100% interest?. Now after years when interest will be negligible, I will transfer 50% share in current house to my wife and in consideration she will transfer 50% share in new house to me . Now I will be absolute owner of new property and my wife will be absolute owner of existing owner and both properties will be exempted from income tax, wealth tax. Will transferring shares to each other for consideration at same time exempt capital gain? I need to pay stamp duty on the property(50%value) whose Market Value is more?
Please share opinion as to which option is good to follow. Also requesting to answer the questions asked in between those options.
Option One: Registering new property in my name only: I will claim this new property as deemed to be let out and will set off full interest against my salary till interest component is high. Now after years when interest will be negligible, I will transfer 50% share in current house to my wife. Now I will be absolute owner of new property and my wife will be absolute owner of existing owner and both property will be exempted from income tax, wealth tax. I will be required to pay 50% stamp duty for this transfer and also transferring 50% share without consideration will still make me deemed owner of existing property. But I will try to show some consideration or will transfer at market value to avoid capital gain. Please evaluate this option?
Option Two: Registering new property jointly with wife: I will claim this new property as deemed to be let out and will set off full100% interest against my salary till interest component is high. Will I be able to take benefit of full interest though I am 50% owner? I will be paying full EMI and interest and will I be able to claim 100% interest?. Now after years when interest will be negligible, I will transfer 50% share in current house to my wife and in consideration she will transfer 50% share in new house to me . Now I will be absolute owner of new property and my wife will be absolute owner of existing owner and both properties will be exempted from income tax, wealth tax. Will transferring shares to each other for consideration at same time exempt capital gain? I need to pay stamp duty on the property(50%value) whose Market Value is more?
Please share opinion as to which option is good to follow. Also requesting to answer the questions asked in between those options.
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