Home Loan in my name and register in parents name

POSTED BY vijay ON May 29, 2011 2:06 pm COMMENTS (10)

Hello,

I plan to buy a house by taking loan of 25 lakh. Instead of availing tax exemption i would prefer paying the rent. As i think once i repay the entire amount, my entire salary will be taxable.

This is what i have in mind. I would like to avail the loan but register the house in Father or Mother’s name. Either of them will be cooaplicant. Every month i will pay them rent. I will not claim exemption for the Loan. Is this valid/legal. Let me know if there is any documentation / formalities that should be done.

10 replies on this article “Home Loan in my name and register in parents name”

  1. Manish kapoor says:

    I did the same as vijay did…The land is registered in my mother’s name and a loan amount of 25 lakhs was taken by me with my mother only as co-applicant.All EMI’s were paid by me and also after 3 years I repaid the full loan.Now my brother&sister is claiming the right on the said property.I wanna ask you that do they have equal right though the entire money was spent by me.What do I do to claim my right. I am a Hindu and my mother has Alzheimer.

  2. ashal jauhari says:

    Dear Vijay, HRA is proposed to withdrawn under DTC, as per your thinking it may remain or may not remain, that’s an uncertainty & only time ‘ll tell.

    If you opt to register the house under your name right now, you can’t transfer/gift it to anybody till the time loan is repaid fully.

    In case of a gift, registration of property in the name of gift receiver is compulsory. Yes after paying the stamp duty & registration charges, the benefit ‘ll not be that much attractive.

    Thanks

    Ashal

  3. vijay says:

    Ashal and Others…

    The biggest dilema i have now is weather DTC will take away the HRA completely? I feel this might not be done as this will impact big amout people. Govt might retain this.

    The other plan is initially register it in my name and gift it later. I am not sure if this can be done when there is outstanding loan. Further i am not sure if they would ask to re-register the property. If this is the case, gifting will be expensive.

  4. ashal jauhari says:

    Dear Jaya, FYI please, me & my mother was a co-applicant in a home loan & bank had no issue for this. Only one of us was owner of the property in question.

    I hope it ‘ll clear your doubt.

    Thanks

    Ashal

  5. JayaprakashReddy says:

    Also one more point normally banks do not entertain loans as co-applicant for parent-child relationship. Did you get the confirmation from the bank that you can became a co-applicant?

  6. ashal jauhari says:

    Dear Vijay, I also prefer to answer on this forum but beyond a point I understand that people may not share much personal info that’s why at times I have to ask for personal mail.

    Anyway regarding your own calculations for the home loan & HRA related issues. A shocker in the form of DTC may punch you hard in future. As per DTC proposals HRA benefit ‘ll not be there as & when DTC arrives. Take note of it.

    Thanks

    Ashal

  7. ashal jauhari says:

    Dear Vijay, Let me understand the situation correctly with a example. Say the EMI amount is 15K & you ‘ll pay the same amount as rent to your father/mother which ‘ll be later on paid from his/her account as EMI to bank.

    My dear friend, your thinking is good & tax friendly & no Tax evasion is involved. You may Go ahead. The one important point, the Down payment for the house (amount other than home loan) should come from parent’s bank account & not from yours’.

    In case your parent don’t have sufficient amount for DP, you may gift the short fall to them & they may pay it to developer.

    In case you want to discuss in detail, you may Ask Manish to get my personal mail ID.

    Thanks

    Ashal

    1. vijay says:

      Thanks Ashal,

      You have got it right. i explain you a bit more. i plan to take 25 to 30 lakhs loan. Plan is to close this loan in 4 to 5 years. If i avail exemption, after loan is closed, i would end up paying huge tax.

      Keeping tax burden in mind i decided to have loan in my name and make register in parent owner. Bank might not give 30 lakh loan directly to my parents.

      This will also give my parents steady income in the form or rent.

      Is there a way intially i register in my name and then Gift it to parents and start paying rent?
      The only problem i see is, i may not be able to gift it till there is outstanding loan…..

      Ashal, i would surely like to have your email ID, howerver your inputs provided in forum might help a lot others like me…. Thanks for your help and good work.

  8. vijay says:

    Ashal,

    You have got it right. They can claim benefits and show the rent as part of thier earning.
    My only doubt is, am i evading tax laws? I want to be within the law and avail maximum benefits.

  9. ashal jauhari says:

    Dear Vijay, Please confirm that my understanding is right or not. You want to go for HRA benefit only by paying rent to your parent & your parent ‘ll claim Home loan benefit.

    Am I right?

    Thanks

    Ashal

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