Among the many aspects of taxation, joint ownership of property (between two spouses) is one such topic that is not commonly discussed. However, it can have significant tax implications for the couple. Below are four benefits of buying a flat in joint ownership with your wife.

• Claim higher tax deductions on interest paid:As per the Income Tax Act, individuals who own a house are eligible for tax deductions up to ₹2 lakh per year on interest paid towards the home loan. However, if you have purchased the home jointly as co-applicants in a home loan, you and your wife, both will be eligible for deductions up to ₹4 lakh on interest paid towards the home loan. In this way, you can considerably reduce the family’s tax burden every year.
• Lower tax on rental income:If you are receiving rent from that co-owned property and your wife falls under the lower tax bracket, your taxable rental income will be lower because half of the rental income will be added to your wife’s taxable income.
• Tax benefits under Section 80C:You and your wife can avail tax deductions up to ₹1.5 lakh each under Section 80C for payment made on stamp duty and registration for buying a house. Apart from that, you can also get tax relief up to ₹1.5 lakh each in a year on principal repayment towards the home loan under Section 80C of the Income Tax Act.
• Benefits under sections 54 and 54EC:If you sell a house, you have to pay tax as capital gains from the sale, if there is a profit. However, under section 54 of the IT Act, if you purchase another house with a specified period, you can reduce the cost of the new house from the taxable capital gains. In the case of joint ownership, both the spouses can get deductions from their taxable capital gains and further reduce their tax liability.

Also, under 54EC of the Income Tax Act, you can get deductions up to ₹50 lakh on capital gains on the sale of flats if you invest in 54EC bonds such as the ones issued by the National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC). However, in metro cities such as Mumbai and some areas of NCR where the costs of flats are high, you won’t be able to save much tax this way. But if you purchase the apartment/house jointly, you can get deductions up to ₹1 crore on capital gains by investing in 54EC bonds.

You can save significant taxes through joint ownership of property. But it’s important to remember that both the spouse have to contribute equally to the purchase of the home to avail maximum tax benefits. The equal contribution also helps save tax when you sell the property.