After marriage, Rajesh Agarwal, a tech professional, decided to make his wife Siddhi Agarwal a joint owner of his flat in Bangalore. He believed that it would be a simple process with minimum paperwork, but his misconception was soon dispelled. So much so that Rajesh started to rethink his decision.
Property owners in India can add co-owner at any point in their lives. Often, people who have bought a property before getting married do it. It is also done to avoid any conflicts in the future. However, one must remember that it is a tedious process with cost implications.
Understanding the process
To add a co-owner, a new deed has to be created, which must be registered at the sub-registrar’s office for it to be legal under the Transfer of Property Act. This can be done either by creating a sale deed or a gift deed.
Sale deed: The first way is to sell a portion of the property to the other person. The beneficiary can use this sale deed to get themselves registered as the co-owner of the property by paying the requisite charges. Like any other sale deed, this also has to be registered at the sub-registrar’s office. Usually, the stamp duty rate varies between 5%-12% of the property value (varies in different states). The registration charge is 1% of the property value.
Gift deed: Another way to add a co-owner is by gifting a portion of the property to the beneficiary. Here, a gift deed must be executed and registered at the sub-registrar’s office. Stamp duty and registration charges would be applicable at the time of registration. The stamp duty is generally 2% of the property value, along with a 1% registration charge.
Are there any advantages?
Co-owning a property is recommended for married couples; if one of the partners passes away, the property automatically gets transferred to the surviving spouse (if the share in the property is equal). Secondly, if the couple has a joint home loan, both partners can avail tax benefits.
What about tax implications?
As mentioned earlier, spouses can individually claim tax benefit under Section 24 and Section 80C of the income tax law. If the property is sold in the future, the co-owners will have to pay capital gains tax proportionate to their share in the property.
What if the property is on loan?
If the property is still on loan, the borrower will have to inform the bank about the new arrangement. After a new sale deed is created and registered, the bank will also create a new home loan agreement adding the co-owner’s name to it. Here, some banks also insist on making the co-owner a co-borrower in the home loan application. This is done after the bank is satisfied with the creditworthiness of the new owner. This whole procedure might involve some cost, which will vary from bank to bank.
What if it is an under-construction property?
To add a co-owner in an under-construction property, the agreement from the builder is a must. For this, you will have to pay transfer charges. However, this is recommended as you won’t have to pay additional registration and stamp duty charges later.
Points to remember
- When drawing a new deed, it is good to clearly state the type of ownership. For instance, if you want to share the property equally, then a joint tenancy will come into the picture. Joint tenancy, in simple words, means that the owners procure the same and equal title of the property at the same point of time, by the same title deed. It also comes with the rule of survivorship feature, according to which, upon the death of one of the co-owners, the share is passed on to the remaining surviving co-owners.
- In case of an unequal share, the co-ownership would be a tenancy in common. Tenancy in common is a form of joint ownership of property wherein each owner has a separate and distinct share in the property. An important feature that distinguishes tenancy in common is that there is no concept of ‘survivorship’ as in joint tenancy.
