New Delhi: Buying a house is everyone’s dream. The Narendra Modi government has been helping in making homebuyers realise their dreams with different tax benefits.
For a house purchased, more tax rebates are being given for the same cost. You can buy a house jointly too; it is not necessary that the partner would be a parent or spouse. He or she may be your relatives, friends or associates.
1. No benefit of tax rebates to others when house purchased alone
According to the Income Tax Act, you can claim tax exemption on the payment of the interest for a home loan. If you live in the house, you can claim tax rebate up to Rs 2 lakh in a year on the payment of interest. But if the house is bought together with someone, both the shareholders in the house can claim a tax rebate of up to Rs 2 lakh each.
2. Loss of tax on rental of house purchased alone
Both the partners get tax benefits on the income in the form of rent from the jointly purchased house. In this case, the rental income is split between the two owners. If a co-owner comes in the lower tax slab, he can take advantage of the low tax rate on his share of rental income.
3. Benefit of tax rebate under Section 54
On selling the house, capital gains are taxable. Under Section 54 of the Income Tax Act, if a person buys a second house with this amount within the prescribed time, the amount invested in the new house decreases with the taxable capital gains. Capital gains are calculated separately for both co-owners when the house is bought jointly. This way, both partners can take advantage of this provision and get rid of the taxable capital gains.
4. Benefits of tax rebate under Section 54C
Capital gains from the sale of a house under Section 54C can be claimed as a tax rebate up to Rs 50 lakh for investing in special bonds. Considering the cost of real estate in India, especially in metro cities, the tax exemption of Rs 50 lakh may not be enough to cover capital gains. Capital gains of more than Rs 50 lakh invite taxes.
However, if the property is purchased together, both co-owners can invest in different fixed bonds. They will get a tax rebate of Rs 50 lakh each separately on the investment. Under Section 54C, one can invest in the bonds of the National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC).