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Many people buy property in the name of their wife to save on stamp duty. But while doing this, it is important to know some important rules related to tax, otherwise there may be problems later.
New Delhi. Buying a house in your wife’s name sounds like a wise move. A little stamp duty is saved and the property also remains in the family. But do you know that while doing this you may unknowingly get caught in the tax trap? Yes, buying a flat or land in your wife’s name is legally a gift, but the tax department can add its rent and profit to your income, i.e. in her name, the tax bill is yours.
If you buy a property in your wife’s name by paying the entire amount from your income and your wife is not an earning person, then this amount will be considered as ‘gift’ under tax rules. But according to the Income Tax law, the gift given between husband and wife is tax free, that is, the wife will not have to pay any tax on this gift.
Effect of clubbing rules
However, there is one important thing in this. Clubbing rules will be applicable under Section 64 of the Income Tax Act. This means that if there is any capital gain from that property on rent or subsequent sale, then that income will be added to your income and counted for tax. If the property is self-occupied, then the clubbing rule will not apply because no income is generated on it.
sales tax rules
In future, when you sell that property, whatever capital gain you get will also be added to your income and will be taxed. This clubbing rule will remain in force as long as the marriage relationship continues.
no tax benefits
Buying property in wife’s name can save on stamp duty, but not on tax benefits. All the income from that property will be considered taxable income of the husband.
