Bank Account

Banks offer bank accounts and several deposit schemes that can be opened by an individual in his own name (single account) or by two or more individuals jointly (joint account).

Primary and Secondary Holder: Primary account holder is the person on whose name account is created in the first place. Ex: Assuming you have a bank account and then once you get married you would like to include your spouse as a joint account holder. You will be the primary account holder and your spouse would be the secondary holder.

Mode of Operation: Banks offer different types of joint account relationships such as: EITHER OR SURVIVOR, ANYONE OR SURVIVOR, FORMER OR SURVIVOR,LATTER OR SURVIVOR. The mode of operation determines who will have access to the account.  For example in EITHER OR SURVIVOR either of them can operate the account and in the case of the death of one of the depositors, the other can continue or the final balance in the account along with all interests (as applicable at the time of closure) will be paid to the survivor. While in case of FORMER OR SURVIVOR joint account, only the first account holder can operate the account. The second depositor gets the right only on the death of the first after undergoing some basic formalities like submission of proof of death etc.

When to add names: One can add or remove the names from joint account any time.The customers need to comply with the guidelines Know Your Customer (KYC). The documents needed to open a Joint Bank Account are not very different from the requirements laid down for individual ownership.

• Identity proof (passport, PAN card, voter ID, driving license etc.)
• Current Address proof (utility bills, bank account statement etc.)
• Recent photograph.

Withdrawal by others as gift:Withdrawal by relatives, in a joint account, is considered as a gift to them. Withdrawals up to any amount, by the relative in effect, would be considered as a gift to the relative according to the Income Tax (I-T) Act. Since gift to relatives is tax-free, there would be no income tax on the recipient. Even for joint holdings between non-relatives, there would be no tax applicable on withdrawals of up to Rs 50,000 under Section 56 of the I-T Act. However, anything above this will be taxed in the hands of the recipient.

Taxation: Clarity of source of income needed for tax purposes. For example : If the account is linked to a fixed deposit offered by the bank and interest earned on it is more than Rs 10,000 annually, the bank will deduct the tax deducted at source in the name of the primary account holder.Income tax officials look at the source of the funds for determining taxes and so, as long as the person can explain his/her part of the income, he/she would have to pay taxes on that part only.

Advice:If both individuals are liable to pay taxes on their individual incomes, they should opt for opening two separate joint accounts and, thereby, maintaining clarity in their sources of funds. So, for instance, the husband could be the primary account holder in one and his wife could be the second holder. It could be vice-verse in another account.

The topic  of joint bank account is discussed in detail in our Bemoneyaware: Joint Bank Account.

Property or Real Estate

Property may be owned either singly or jointly. Joint ownership refers to two parties owning a property together. There is no restriction as to who the co-owner should be and there is no limit on the number of joint owners. Property can be jointly owned with your spouse, brother or parents

• First, the house should be bought in the joint name and proof of co-ownership should be maintained.
• Second, the housing loan should also be taken in joint names. The repayment of loan should preferably be made individually by the co-owners directly, if feasible, or from a joint bank account in which funds for repayment of loan should be contributed by the co-owners in proportion to their ownership/loan. All the co-owners should have their independent income sources from which the loans are re-paid. Buying a house jointly facilitates a larger loan as income of all the coowners would be considered by the lenders. Also, in many states, a lower property registration fee is levied in case the property is owned by women either individually or jointly.
• Typically, the tax benefits are available in proportion to the joint ownership and the loan taken by the co-owners.
• Further, in case of husband and wife, joint ownership also helps reduce succession issue. if one of the partner dies, the surviving spouse automatically becomes the sole owner of the house.

Add On Credit Cards

Most of the card issuing banks in India offer general purpose credit cards. Banks may, at the request of a cardholder, issue a supplementary card,also referred to as ‘add-on cards’, to another individual who is usually an immediate family member of the cardholder such as spouse, major children and parents. A bank may restrict the number of add-on cards per card.

Same Features as Primary card: Add-on cards have the same features as the primary card. The add-on cards can be used for shopping offline as well as online. In addition, the add-on cards can be used domestically as well as internationally. However, some banks may issue a lower variant of primary card as a supplementary card. Moreover, your card account is treated as a single account even if you have add-on cards i.e credit limit on the primary card remains the same. Usually even add-on cards get reward points and these reward points are added to your reward points. This varies from bank to bank.

Limits and SubLimits: Banks let the add-on cards have the same credit limit as the primary card. For instance, if the primary card has a credit limit of R1 lakh, then the add-on cards also have the same amount as the limit. Keep in mind, your credit limit actually gets divided between the primary card and add-on card. Also add-on cards don’t get any extra credit limit. Many banks allow you to set sub-limits on the cards. So, even if you have a 5 lakh credit limit on your primary card, you can have an add-on card sub-limit set to a few thousand rupees or as a per cent of your card limit, say 5%. For example for  Rs 5 lakh primary card  the add-on card will have a limit of Rs 25,000. These spending sub-limits can also be set per month. In banking parlance, it’s called per statement cycle. For cash withdrawals, a few banks offer a lesser amount compared with the primary card. You can set sub-limits for cash withdrawal as well. You can also register for SMS alerts on the usage of these add-on cards to monitor the amount being spent.

Statement and Payment: You get a single credit card statement for all the cards. The bill will have details of the primary card purchases as well as add-on card purchases. The add-on cardholders will not get separate monthly statements.

Credit Report:  Since you are liable to make payments for the purchases made on primary as well as add-on card, your credit report will reflect information about your add-on cards. Therefore, if you know that the person, to whom you want to extend the add-on card to, have had difficulty in managing credit in the past, you may want to set a low sub-limit or reconsider the option.

Cost : Cost of add on card varies from bank to bank. Some banks give a couple of add-on cards for free, others may give more add-on cards for free. Some banks charge an annual fee as well as a joining fee. Usually it’s a few hundred rupees, but if you have a high-end card, the fee for an add-on card could cost more.

How to Apply: Can apply for add-on credit card any time. Get in touch with your bank and fill in the application form. The Reserve Bank of India has now made it mandatory for add-on card applicants to submit know-your-customer (KYC) documents as well.

Add-on cards can be issued only under your authorization and you are responsible for the liabilities/ outstanding dues on the add-on cards. Add-on cards may be issued with the clear understanding that the liability will be that of the principal cardholder. Livemint The good, bad and ugly of add-on credit cards explains add on cards in a comic strip as conversation between two co-workers Sam and Raj. Reserve Bank of India’s (RBI) Master Circular on Credit Card Operations of Banks has guidelines including Add-on-cards which credit card issuing banks/NBFCs should strictly adhere to.

Mutual Funds

In mutual funds investments can be made in joint names.An investor who invests money in mutual funds is called Unit Holder. Two joint names are permissible. While filling the form one needs to fill in the Applicant Information, Name & Address with Contact No., email ID and date of birth for the First Applicant / Second Applicant / Third Applicant, whichever applicable . First Applicant is the person in whose name investment is being made. Joint holder (s) also need to be KYC(Know your customer) Compliant as per CVL, have valid PAN.

When : In Mutual Funds the option of adding joint ownership is only at the type of investing. Subsequent changes are not allowed by funds. Similarly, most funds would not allow the deletion of a living joint holder from the folio.

Mode of Holding: This specifies whether you are investing Single as individual or Joint or Anyone or Survivor(also called as Either or Survivor).

• When an investment is made joint mode of holding it means the units are in both the names and transactions needs signature of both.  The living individual have to submit the dead certificate along with the application to the AMC of mutual fund.
• When one opts for either or Survivor it means the units are in both the names but transaction can be carried out by either the individuals. And in case if one of them is dead the transaction is not stopped.

Thus Anyone or survivor is a better option.

It is possible to change the mode of holding from ‘joint’ to ‘either or survivor’: Investors would have to send a written request, duly signed by all the holders, requesting the mutual fund to change the mode of holding from ‘joint’ to ‘either or survivor’ or vice versa. Sample form for change of mode of holding DSPBlackRock’s Change in Mode of Holding form

For investments in mutual funds to be made online:

Quoting from icicidirect.com 

How can I avail of the Joint Holder facility?

To avail of the Joint Holder facility, you will have to first register the names of the persons with whom you wish to make investments jointly through www.iccidirect.com. After the persons are successfully registered with I-Sec as your joint holders, you can start making investments in joint mode .

Who can be registered as Joint Holder ?

You may predominately appoint any person, aged 18 years or above, who are your family members or other persons as Joint Holders. You will have to mention your relationship with the person while requesting for registering him as a Joint Holder.

I am a registered customer of I-Sec. What is the process for registering a person as my Joint Holder?

For registering a person as your Joint Holder, you will have to submit the duly filled and signed request letter to the nearest ICICI Center/ISec Hub.

Can I deactivate any Joint Holder at a later date?

Yes, you may request for removing/deleting the name of any joint holder at any point in time after the registration .

Can the Joint Holders give instructions for any transaction on www.icicidirect.com?

No. I-Sec will not accept any instruction, whether financial or non financial, from the joint holders as the trading account is held by you and not the joint holders. The holder of the trading account, will be the authorised person for all the registered joint holders and I-Sec will accept instructions only from the account holder.

Demat Account

You need to open demat account to buy and sell stocks. A demat account can be a single holder account or a joint holder account. The joint applicant in Demat is known as Co-holders. A demat account can have maximum three account holders i.e. one main holder and two co-holders.

Mode of operation: At present in the case of a joint demat account, both the holders have to sign all the instructions given to the DPs. There is no option to operate these accounts on either or survivor or No.1 or survivor basis, as is available in bank accounts. For a joint demat account, account modification form has to be signed by all the joint holders. Securities can be transferred from a single holder account to a joint account or vice-a-versa.

Addition of holders: Names for joint ownership can be added only at time of opening demat account. Once a demat account is opened addition / modification / deletion of account holder names is not permitted. In the case of demat accounts held in single name, there is no provision at present to add the name of a second holder, and if you want to add a second name, you are required to compulsorily close the account and open a new account in joint names. This is causes a lot of inconvenience to the accounts holders, who by virtue of marriage require adding the name of the spouse, which can be easily done as in the case of bank accounts. Similarly with the consent of both the holders, there is no provision to delete the second name in the case of joint accounts.

If one of the joint holders expires, Can name of the deceased account holder be deleted from the account?

No. If one of the joint holder expires, new demat account should be opened in the name of surviving joint holders and securities from the previous account should be transferred to the new account.

MoneyLife discusses Agony and ecstasy of demat accounts in detail.

Related Articles:

• Joint Bank Account
• Right Paper Work For Those You Love: Part 1
• Claiming Deceased’s Mutual Fund Units

In this article we explained about joint ownership of different kind of financial products such as  Bank Account, Property, Add-On Credit Cards, Mutual Funds, Demat account. We shall also see difference between joint ownership and Nominee. Have you gone for joint ownership of financial product? Which kind of financial products should one go for?