Stamp Duty Savings through Joint Property Ownership: Navigating Tax Implications

Tax Implications of Buying Property in Spouse's Name to Save Stamp Duty

In a bid to save on stamp duty and registration charges, some individuals may consider buying property in their spouse's name. However, the tax implications of such a transaction can be complex and may not be entirely beneficial.

The Indian income-tax act has specific provisions governing the tax liability of gifts received from specified relatives, including a spouse. According to these provisions, gifts received from a spouse are fully tax-exempt, regardless of the amount. This means that in the case of buying a property in one's spouse's name, there will be no tax implication for the spouse at the time of purchase.

However, the clubbing provisions of the Income Tax Act, 2025, come into play when the property is let out or sold. Section 99 of the Act provides that income arising from an asset gifted to a spouse is to be clubbed in the hands of the giver. This means that if the property is let out, the rental income will have to be clubbed with the giver's income, and the capital gains arising out of the sale of the property will also be included in the giver's income.

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In the case of buying a property in one's spouse's name, the giver is required to deduct tax at source at the rate of 1 percent if the purchase consideration or the stamp duty valuation of the property exceeds Rs 50 lakh. While saving on stamp duty and registration charges may seem attractive, the cost of compliance with the clubbing provisions can be far higher and more cumbersome in the long run.

Experts advise against entering into such transactions solely to save on stamp duty and registration charges, as the potential long-term costs and complexities can outweigh any short-term benefits.