Table of Content
What is Joint Ownership in Real Estate?
Since purchasing properties in Chennai or any other metropolitan cities requires a significant financial capital, it might be intimidating for an individual in a competitive real estate market like India. Therefore, “joint ownership” is recommended by industry experts as one of the greatest strategies to reap several benefits, especially if all of the owners are employed professionals.
Types of Joint Ownership in Real Estate in India
- Joint Tenancy– In a joint tenancy, each person with an undivided stake in the property has equal owner rights. Because of this, this kind has the right of survivorship, which means that if one co-owner dies, their share is distributed equally among the other co-owners.
- Tenancy in Common– In this case, each co-owner may own a distinct and distinct portion of the property’s joint ownership. To their advantage, each owner is free to sell, transfer, or mortgage their portion of the share. The family survivor receives a portion of the owner’s property in the event of their death.
- Tenancy in Entirety– Married couples are granted ownership in this case, along with rights for survivors. In the event of one partner’s death, this form permits the remaining spouse to possess the entire property and shields it from any personal debt.
- Community Property– This kind exclusively refers to shared ownership in a marriage, when each partner receives a 50% share of assets acquired during the union.
Advantages of Joint Ownership in India
- You can split the cost of joint ownership. When it comes to a house or investment, a substantial sum of money is needed to buy a property. By splitting the expenses, individuals may increase the affordability and accessibility of property ownership.
- The co-owners’ combined purchasing power rises with joint ownership. They may be able to purchase bigger or more expensive residences as a result. If not, individual purchasers may not be able to afford these assets. More options for properties are possible when resources are pooled. They don’t have to worry about money when they invest in their ideal home.
- Being a property owner comes with a number of obligations. These consist of property management, upkeep, and repairs. These obligations may be split among joint owners. Everyone can handle it better after taking this step. Living or investing in harmony is made possible by the shared load.
- Planning an estate might be made easier with joint ownership. This usually occurs when family members or spouses are involved. When one co-owner dies, the property usually goes automatically to the surviving owner or owners. The probate process is not necessary. The inheritance procedure is streamlined by this legislation.
- For investment properties, joint ownership may offer the chance to earn rental revenue. Profits from the property’s rental can be divided among co-owners. The prospective financial return on their investment is offered by this channel.
Tax Benefits of Owning a Property With Joint Ownership
The following are some possible tax benefits of India’s joint property ownership laws:
- Increased Deductions in Home Loan Interest: Each co-owner is eligible to claim an annual deduction of up to Rs. 2 lakhs for the interest paid on a home loan for a jointly owned property under Section 24(b) of the Income Tax Act. Comparing this to just owning a home, the entire deduction limit is essentially raised.
- Minimized Capital Gains Tax: Depending on each co-owner’s ownership stake, capital gains are allocated to them when a jointly held property is sold. This may lower the total tax obligation by bringing the individual capital gains of each owner below the taxable threshold.
- Sharing of Deductions under Section 80C: Section 80C of the Income Tax Act allows for the deduction of expenses including payments to specific investment plans, child tuition, and principal repayment on a house loan. The combined tax advantage of joint ownership can be maximized by dividing these deductions among the co-owners.
- Benefits of Stamp Duty: In many Indian states, properties jointly held by couples are exempt from stamp duty. When buying a house together, this may result in reduced upfront registration fees.
- Estate Tax Planning: One useful strategy for estate planning is joint ownership. When a property is held jointly with a spouse or kid, following the death of the first owner, a portion of the property may automatically transfer to the survivor. This approach could lessen the cost of inheritance taxes.
- Tax Benefits for Co-Borrowers: Under Sections 80C and 24(b), co-owners who are also co-borrowers for a house loan may each claim a deduction on the principal and interest portions of the loan.
Rights Offered to Owners for Properties With Joint Ownership
Rights of Owners in Joint Tenancy
- The entire property is owned equally and undividedly by each joint owner. This indicates that no one owner owns a monopoly over any particular area of the land.
- This provision guarantees that, in the event of a joint owner’s death, their portion will immediately pass to the remaining joint owners. Until there is just one owner left, this process keeps going.
- In a shared tenancy, the property is deemed indivisible. No one owner may claim exclusive rights to a piece of the property; all co owners are free to use the full property.
- Joint owners usually divide up the property’s decision-making duties. All co-owners must agree on decisions about upkeep, upgrades, and possible sales.
Rights of Owners in Common Tenancy
- Tenancy in common, as opposed to joint tenancy, permits ownership share flexibility. The ownership stake of each co-owner is unique and might be either equal or unequal.
- The right of survivorship is not a part of tenancy in common. A co-owner’s share does not immediately pass to the surviving co-owners in the event of their death. It may be sold on its own or left to heirs.
- In a tenancy in common, the property is seen as divisible. The shares of each co-owner are distinct and can be sold, given away, or inherited separately from the other co-owners.
- In a tenancy in common, co-owners have greater autonomy over their own decisions. Decisions about each owner’s portion of the property can be made without the other owners’ unanimous approval.
Rights of Owners in General
- Under the restrictions imposed by the other co-owners, each joint owner is free to use and occupy the entire property.
- In addition to being jointly liable for costs like upkeep, property taxes, and mortgage payments, joint owners also split the property’s revenue.
- Generally speaking, joint owners are free to sell, transfer, or mortgage their stake in the property, subject to any conditions or limitations specified in the co-ownership agreement.
- The right to access financial information about the property, such as revenue, costs, and possible liabilities, is granted to co-owners.
- In the event of disagreements or legal actions pertaining to the property, joint owners are entitled to take part in the proceedings and reach decisions as a group.
Frequently Asked Questions
1. What are the disadvantages of joint property ownership in India?
Despite its various advantages jointly owned properties come with a few disadvantages. Some of them are lack of individual control, conflicts & disputes, financial risks, and delay in documentation. However, all the can be rectified with proper registration and background check.
2. What will happen if one owner of a jointly owned property dies?
The property is passed on the surviving owners due to the right of survivorship in the case of death of an owner in a jointly owned property. The rest of the owners can draft a relinquishment deed as well for the transfer of the property.
3. Can one owner has the rights to sell a jointly owned property?
It depends on the sale deed. Generally, one owner can sell a jointly owned property when the shares are mentioned in the sale deed.