Empower women through property ownership


It is a well-documented fact that property ownership enhances women’s empowerment, the latter is a desirable social objective in itself. It also has significant economic benefits for society. Entrenched social attitudes have resulted in very low levels of property ownership by women. While these attitudes are changing slowly, most of our laws are outdated and reflect the old attitudes.

Fortunately, things are changing and various laws are being modernised to empower women. Among the economic initiatives, a noteworthy one has been the action by many state governments to encourage property ownership by women by dropping the stamp duty rates for properties women owned exclusively by them. This spurred a brief flurry of interest in getting women to own property, even if only to save on stamp duty on registration. The flurry soon died down and unfortunately, it has not resulted in a large increase in ownership by women. The reason is not difficult to find.

The main culprit is the income tax provisions dealing with assets exclusively owned by a wife if it is purchased or paid for by the husband. Typically, if a loan is taken by the husband-wife duo on a property owned exclusively by the wife, the husband cannot get deduction for the loan installments paid by him, since only owners or co-owners are eligible for tax deduction on home loan instalments. This is a major factor that prevents exclusive ownership of property by women.

Secondly, if the property is owned by the wife but had been paid for by the husband, then the rental income may be taxed in his hands (without allowing deductions) and the capital gains, if any, will be taxed in his hands. As a result of such harsh tax provisions, the husband becomes a co-owner (or the sole owner in many cases) to get the benefit of deduction of interest payable on the home loan.

The provisions for calculation of income from house property (dealing with deduction of interest payable on home loans) were made in an era when home loans were unheard of. Ownership of property only resulted in income and home loan interest turning property income into loss was uncommon.

The tax provisions on clubbing of income have also been around since 1961 and date back to an era of very high tax rates and significant annual tax in the form of the wealth tax. That created the need to transfer income and assets in favour of wives to reduce the level of overall tax incidence. Hence, the clubbing provisions were introduced to prevent splitting of income and assets by the husband. The benefits of splitting income and assets have reduced significantly with the reduction of income tax rates, as well as the abolition of wealth tax and estate duty.

At the same time social mores have also changed significantly and if women are made sole owners of property (even if it is only for saving taxes) it will significantly empower them.

It is about time that the tax laws that impede property ownership by women should be amended. It will definitely lead to a surge in property ownership by women. The maximum tax reduction for somebody who uses asset transfer to the hilt is Rs 1.75 lakh a year. This should be considered the government’s contribution towards greater women empowerment.

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