In India, it is very common to own a house property jointly with spouse or children for a smooth succession or availing a higher loan amount. The income tax implications are different for joint owners of house property. Separate provisions are there in the Income Tax Act, 1961.
In the Income Tax Return forms notified for the assessment year 2020-21, it is provided that a taxpayer who owns a house property jointly with one or more persons cannot file ITR-1 or ITR-4.
Introduction
A person owns a house property either singly or jointly. There are various factors that a person decides before registering the house property either on his own name alone or jointly with other persons who may or may not be relatives.
There are various pros and cons involved in both types of ownerships under the general properties law. However, the discussion of this article is confined from the perspective of income tax only.
Income Tax incidence on a House Property
Under the Income Tax Act, 1961 the followings are the incidences of income-tax which may arise from a house property whether singly owned or jointly owned:
Events or happenings
|
Incidence of Income
Tax
|
Acquisition
of a house property
|
TDS
obligation u/s 194-IA may arise, if
acquired from a resident
TDS
obligation u/s 195 may arise, if
acquired from a non-resident
Gift
income u/s 56(2) may arise
|
Construction
of a house property
|
TDS
obligation u/s 194M may arise
|
Occupation
of a house property
|
Annual
Value to be determined. It is ‘Nil’ in case of self-occupied house property.
|
House
property on rent
|
Rental
Income from house property is taxable u/s 22
|
Sale of a
house property
|
Capital
Gains income may arise
|
Under income-tax law, the benefits given for owning a house property multiplies if a property is owned jointly with spouse or children or any other relative of the individual or friend.
Buying or owning a house is a dream of millions. Government policies also support the dreams of the people. Various policies like housing for all and other schemes or yojanas are introduced by the government to promote owning a house.
Apart from the policies. the government also promotes housing by announcing various tax benefits to the owners of the house properties.
What is a Joint Owner in a house property
If a person owns a house property with more than one person then such a property is called a jointly owned house property. In contrast to this, if house property is owned by only one person then the property is called singly owned house property.
Each person is called a joint owner of the house property.
Co-owner of house property: A joint owner of a house property is called as co-owner of the house property. Co-owner and joint owner is synonymous for income tax purpose.
When a house property is jointly owned by one or more persons then each joint owner is known as co-owner. In a similar manner, Co-ownership means where a single house property is owned by more than one person. In other words, when two or more persons hold title to the same property it is called Co-ownership or Joint ownership.
Every joint or co-owner has a proprietary right of the entire property. Any sale of the property has to be done with the consent of all co-owners involved. However, if the conditions in the agreement give co-owners exclusive rights to certain parts/portions of the property, a co-owner can sell his portion to whom he chooses.
Income tax implications for joint owners of properties
It is a common practice in India to buy house property in joint names. In most cases, the buyer adds the spouse’s name or children's name as a joint holder for various reasons such as smooth succession, easy transfer of property to children, etc.
Many times, co-owners are added in a property to avail a higher amount of bank loan to acquire the property where the individual's income is not sufficient to avail a high amount of loan.
Under general laws, the spouse will be treated as a legal co-owner of the house property as his or her name is mentioned in the registered deed.
It is a common myth that where a house property is co-owned, the income from the property should be taxed equally in the hands of the co-owners. But this is not the case all the time.
The co-ownership or joint ownership of a house property for income-tax purposes is different from the general laws. A person who is normally a co-owner of a house property under the general laws may not be a co-owner of the same house property under the income-tax laws.
Therefore, it is pertinent to understand who is co-owner as per the Income Tax Act.
Who is co-owner as per Income Tax Act
The Income Tax Act, 1961 has not defined the term co-owners of a house property. It only contains guidelines for the taxation of the share of such co-owners in house property.
Section 26 and section 27 of the Income Tax Act, 1961 are noteworthy to discuss.
Section 26 states that when two or more persons own the property and their respective shares are definite and ascertainable, the share of each such person shall be assessed separately for computing the house property income.
So, section 26 mere provides how the income from house property shall be taxed in the hands of each co-owner.
Further reading of section 27 clarifies that the transferor of house property will be deemed to be the owner of the property if he has transferred the property for inadequate consideration to his or her spouse.
Therefore, when a husband finances the entire consideration for the acquisition of a house property but includes the name of his wife as a co-owner or joint owner, it is the husband who is the owner of the house property and not his spouse.
Under the income tax law, the husband will be deemed to be the owner of the property and not the spouse. Even the spouse will not be considered as a co-owner of the house property under income tax.
Any income arising from the house property will be taxed in the hands of the husband only.
On the other hand, if both the husband as well as the wife finances the consideration for the acquisition of house property and both are named as owner in the registered deed then both the husband and the wife are co-owners of the property.
Assuming both have contributed an equal amount for the acquisition, both are 50:50 co-owners under the income tax law.
In this case, any income arising from the house property will be apportioned equally between the spouses and taxed separately in the hands of the husband as well as in the hands of the wife.
Hence, under the income tax law, the share of each spouse is seen from a different perspective than the legal ownership as mentioned in the registered deed.
It is the funding pattern of the property that determines the owners or co-owners of a house property. Each spouse has to pay tax on income in the ratio in which he or she has contributed to the cost of purchase of the house property.
The rule is very clear. If you have not contributed or funded the acquisition price, you are not the co-owner of the property even if your name appears in the deed. You are a co-owner in the ratio of investment or funding to the purchase price of the property.
Under the income tax law, the proportion of investment in the property will determine the ownership status in a property.
However, in the case of inherited property, the ratio of ownership in the property will be decided on the basis of legal documents.
Let us understand the division of income between the spouse with an example.
Example 1: Mr. and Mrs. Rakesh has acquired a flat for Rs. 40,00,000. Both are working couples and both have contributed Rs. 20 Lakh each for the acquisition. No home loan is taken for acquiring the flat.
The flat is rented out to a tenant for a monthly rent of Rs. 20,000. The municipal tax for the year was paid by both amounting to Rs. 4,000.
Other information:Income from Salary of Mr. Rakesh - Rs. 20,00,000.
Income from Salary of Mrs. Rakesh - Rs. 12,00,000.
Investment qualified for deduction u/s 80C - Rs. 2,00,000 for both.
Compute the total income of Mr. and Mrs. Rakesh.
Computation of Total Income:
Particulars
|
Mr. Rakesh
Amount (in Rs.)
|
Mrs. Rakesh
Amount (in Rs.)
|
Income
from Salary
|
20,00,000
|
12,00,000
|
Income
from House Property
(See Note-1 below)
|
82,600
|
82,600
|
Gross Total
Income
|
20,82,600
|
12,82,600
|
Less:
Deduction u/s 80C
|
1,50,000
|
1,50,000
|
Total or
Taxable Income
|
19,32,600
|
11,32,600
|
Note 1: Computation of Income from house property
for each co-owner
|
||
Rental
Income [(20,000 x 12)/2]
|
1,20,000
|
1,20,000
|
Less:
Municipal taxes paid
|
2,000
|
2,000
|
Net
Annual Value
|
1,18,000
|
1,18,000
|
Less:
Standard Deduction of 30% on Net Annual Value
|
35,400
|
35,400
|
Income
from house property
|
82,600
|
82,600
|
Note 2: The maximum amount of deduction u/s 80C is
limited to Rs. 1,50,000
|
||
After discussing the status of joint owners (or co-owners), let us discuss some of the tax incidences on certain typical natures of income from a co-owned property.
Taxation of rental income from a jointly (or co-owned) owned property
A house property may be a self-occupied or deemed to be let-out or actually let-out property.
Self-occupied house property:
Prior to 2019, only one house property was allowed to be self-occupied. If an individual owns more than one house property, except one, the other house property will be deemed to be let-out. When a property is deemed to be let-out, the notional rental income is charged to tax from that property.
Budget 2019 has increased the limit of self-occupied house property to two. From 2019-20, an individual can own two residential house properties as self-occupied house properties without any tax incidence on notional rental income.
In the case of a self-occupied house property, the income from such property is taken as 'Nil'.
Let-Out house property:
When a jointly owned house property is let-out on rent, the rental income is chargeable to tax.
Where the joint owner has not contributed to the purchase price of the property, then the entire rental income will be taxed in the hands of that joint owner who has funded the purchase consideration in his individual capacity.
The deduction from the rental income will be allowed to such an owner only. In this case, neither the income or the deduction will be apportioned between the joint owners for the reasons stated earlier in the preceding paragraphs.
Example 2: Mr. Rakesh has acquired a flat for Rs. 40,00,000 which was fully paid by him. however, while registering the purchase deed, he has added and included the name of his wife in the deed as a joint owner.
Where the joint owner has not contributed to the purchase price of the property, then the entire rental income will be taxed in the hands of that joint owner who has funded the purchase consideration in his individual capacity.
The deduction from the rental income will be allowed to such an owner only. In this case, neither the income or the deduction will be apportioned between the joint owners for the reasons stated earlier in the preceding paragraphs.
Example 2: Mr. Rakesh has acquired a flat for Rs. 40,00,000 which was fully paid by him. however, while registering the purchase deed, he has added and included the name of his wife in the deed as a joint owner.
The flat is rented out to a tenant for a monthly rent of Rs. 20,000. The municipal tax for the year was paid by both amounting to Rs. 4,000.
In this case, even though Mr. Rakesh has added the name of his wife in the deed as a joint owner, however, for income tax purposes, only Mr. Rakesh will be considered as the owner of the house property by virtue of section 27.
His wife will not be considered as co-owner in the house property for income tax purposes.
The entire rental income will be taxed in the hands of Mr. Rakesh. No part of the income will be taxed in the hands of his wife.
In this case, even though Mr. Rakesh has added the name of his wife in the deed as a joint owner, however, for income tax purposes, only Mr. Rakesh will be considered as the owner of the house property by virtue of section 27.
His wife will not be considered as co-owner in the house property for income tax purposes.
The entire rental income will be taxed in the hands of Mr. Rakesh. No part of the income will be taxed in the hands of his wife.
Deduction of interest on housing loan in case of joint ownership
Self-occupied house property:
In the case of self-occupied house property, the income is taken as 'Nil'. However, if the house property is acquired with borrowed capital or home loan, then the interest paid on such a home loan will be allowed as a deduction which will only result in 'loss'.
In case the co-owner has invested in the house property then the loss shall be distributed among the co-owners in the ratio of investment in the house property.
The benefit of holding an asset in joint or co-ownership is explained. Suppose, the interest paid on the home loan taken to acquire the house property during a year is Rs. 3,00,000.
In the case of single ownership, the maximum amount of loss on account of home loan interest is limited to Rs. 2,00,000. So in the above case, in this case, the taxpayer can avail of a maximum of Rs. 2,00,000 as a set-off of loss from other income. The remaining unabsorbed loss of Rs. 1,00,000 will be wasted and can never be claimed.
Instead of single ownership, if the house property is co-owned with the spouse and if both the spouses have taxable income, the loss of Rs. 3,00,000 will be divided equally between the spouses assuming both have invested equally in the property.
Both can claim a loss of Rs. 1,50,000 from their respective taxable income. The loss will reduce their taxable income and thus the ultimate tax liability.
Let-out house property:
If the house property is let out then the treatment of loss on account of interest paid on home loan will be slightly different.
In the case of a let-out property, there is no limit on the interest payment on home loan. In other words, the interest of more than Rs. 2,00,000 can be claimed as deduction from rental income.
However, there is a rider. The set-off of loss in the current year (i.e. the year in which loss first happens) cannot exceed Rs. 2,00,000. The difference of a let-out property with a self-occupied house property is that in case of a self-occupied house property, the loss is lost forever but in case of a let-out property, the loss amount in excess of Rs. 2,00,000 can be carried forward for set-off against rental income for the next 8 (eight) assessment years.
In case the co-owner has invested in the house property then the loss shall be distributed among the co-owners in the ratio of investment in the house property.
The benefit of holding an asset in joint or co-ownership is explained. Suppose, the interest paid on the home loan taken to acquire the house property during a year is Rs. 3,00,000.
In the case of single ownership, the maximum amount of loss on account of home loan interest is limited to Rs. 2,00,000. So in the above case, in this case, the taxpayer can avail of a maximum of Rs. 2,00,000 as a set-off of loss from other income. The remaining unabsorbed loss of Rs. 1,00,000 will be carried forward for the next 8 assessment years to be set-off from income under the head house property.
Instead of single ownership, if the house property is co-owned with the spouse and if both the spouses have taxable income, the loss of Rs. 3,00,000 will be divided equally between the spouses assuming both have invested equally in the property.
Both can claim a loss of Rs. 1,50,000 from their respective taxable income. The loss will reduce their taxable income and thus the ultimate tax liability.
Hence, the entire interest payment of Rs. 3,00,000 will be absorbed in the same year itself.
Deduction u/s 80C of Principal repayment on housing loan in case of joint ownership
Similar to tax benefits of interest paid on home loan, the deduction u/s 80C for principal repayment of the same home loan is divided among the co-owners in the ratio of ownership. For this, it is necessary to repay the loan installments from the bank account of each co-owners. If the EMI is debited from one account, it is advisable to fund the same account by both or all the co-owners.
In case the co-owner has not contributed any sum towards the purchase consideration, then only the person who has fully funded the purchase price is eligible for deduction u/s 80C.
The maximum amount of deduction that can be claimed u/s 80C is Rs. 1,50,000.
Taxation of profit on sale or capital gains from a jointly owned property
The profit on the sale of house property is known as capital gains under the income tax law. he capital gains may be short term capital gains or long term capital gains depending on the period of holding of assets since its acquisition. In the case of inherited property, the period of holding will start counting from the date of its holding by the previous owner(s).
Under the income tax law, if house property is held for less than 24 months then gain arising from sale or transfer of such house property will be short term capital gains.
If house property is held for 24 months or more then gain arising from sale or transfer of such house property will be long term capital gains.
Any capital gains will be taxed in the hands of the owner of the house property. The computation of capital gains will remain the same whether the house is self-occupied property or a rented one.
As stated earlier, in the case of a jointly owned property, it is very important to define the ownership ratio of each co-owner to determine their tax liability.
In the case of a jointly purchased property, ownership ratio will be determined with reference to the amount of investment in the property by each co-owner for acquiring the property. The mere mention of the name of one of the joint persons in the registered deed does not make him owner for the computation of income under the Income Tax Act.
If the co-owner has not contributed anything for purchase of property (mostly happens in case the joint name is with housewife) then he or she will not be treated as co-owner.
In the case of inherited property or property received under a gift, the ratio of ownership in the property will be decided on the basis of legal documents.
When a jointly owned property is sold then the sale consideration is required to be split between exch co-owner. If the sale deed mentions the sale consideration of each co-owner separately, then the same shall become the 'Full value of consideration' for the transfer of the property.
Instead, if the sale deed mentions a consolidated sale consideration for the transfer of the property then the same should be split in the ratio of ownership in the property between each co-owner to determine the 'Full value of consideration'.
After determining the Full value of consideration, the cost of acquisition for each co-owner shall be reduced to compute the capital gains for each co-owner separately. For a long term asset, the benefit of indexation is available.
Example 3: Mr. and Mrs. Rakesh has acquired a flat for Rs. 30,00,000 on 10-01-2005. Both are working couples and both have contributed Rs. 15 Lakh each for the acquisition. No home loan is taken for acquiring the flat.
On December 20, 2019, the house property was sold by them for a consideration of Rs. 1.35 crore. As per sale deed with the buyer, the buyer will pay the consideration in the ratio of 50:50 to each of the co-owner separately.
Compute the Capital Gains income of each co-owner.
Computation of Capital gains
Particulars
|
Mr.
Rakesh
Amount
(in Rs.)
|
Mrs.
Rakesh
Amount
(in Rs.)
|
Full value of consideration
|
67,50,000
|
67,50,000
|
Less: Indexed cost of acquisition
[(20,00,000/113)x289]
|
38,36,283
|
38,36,283
|
Long Term Capital Gains
|
29,13,717
|
29,13,717
|
Exemption from Capital Gains for jointly owned property
Long term capital gains arising from the transfer of residential house property can be saved by investing the capital gain amount in the prescribed manner.
In the case of jointly owned property, each co-owner shall invest his share of capital gains in the eligible assets to save the capital gains tax liability. It is not necessary that the new assets should be held in joint names. Each co-owner can acquire a new asset in his or her single name also.
In the given example-3, suppose Mr. and Mrs. Rakesh has decided to invest in NHAI Bond specified u/s 54EC. In such a case, they invest the Long Term Capital Gains of Rs. 29,13,717 in the bonds.
The maximum amount of investment u/s 54EC is Rs. 50 Lakh. Since the share of each co-owner is less than Rs. 50 Lakh, each can invest the entire capital gains in the bonds and can save the tax.
On the contrary, had the property was owned singly, then the capital gains would be Rs. 58,27,434. Out of this, only Rs. 50 lakh could have been invested and tax was required to be paid on the remaining capital gains of Rs. 8,27,434 [Rs. 58,27,434 - Rs. 50,00,000].
TDS on jointly owned house property
Finance Act,2013 has inserted a new section 194-IA in the Income Tax Act, 1961 with effect from June 1, 2013.
This section requires deduction of tax at source @ 1% on the sale of an immovable property (except rural agricultural land), in case the consideration is Rs. 50 lakhs or more.
Immovable property means any land (but rural agricultural land) or building (a Shop, a house, flats, bungalows, etc.).
TDS can be deposited by using the Permanent Account Number (PAN) of the taxpayer under this section. No need to obtain TAN by the individual buyer.
Under this section, the purchaser of immovable property, who will make the payment to the seller, is required to deduct tax.
TDS is required to be deducted at 1% of the consideration paid, but if the seller does not have PAN, then the rate of deduction will be at a higher rate of 20%.
Where consideration is paid by each co-owner:
If a property is acquired jointly by two or more persons, then the above rules will be applied to each joint owner or co-owner separately.
In such a case, the threshold limit of Rs. 50 Lakh will apply for payment of consideration by each of the co-owners of the property.
If an immovable property is valued at Rs. 60 Lakh and the same is acquired by two persons jointly with equal contribution then each co-owner has to pay Rs. 30 Lakh each to the seller and hence no TDS will be applicable. None of the co-owners are required to deduct TDS as stipulated in section 194-IA.
Read the full case law of M/s.Oxcia Enterprises Private Limited Vs. DCIT, Circle-TDS, Udaipur.
In case each co-owners share of consideration is more than Rs. 50 Lakh then each co-owner has to deduct and deposit the TDS separately under their respective PAN. If there are two co-owners, the TDS needs to be deposited by two separate challans.
It is advisable to pay the TDS from the respective co-owners bank account.
Where consideration is not paid by each co-owner:
In many cases, it may happen that the entire consideration is paid by one person and the other person is merely added as co-owner in the registered deed. In normally happens in the case of husband and wife where the husband makes payment of the full consideration and the name of the wife is added for other family reasons.
In this case, since the entire payment is made by the husband, the TDS needs to be deducted on the full consideration of the immovable property by the husband only. the consideration cannot be split between the co-owners.
Restriction on use of ITR-1 and ITR-4 in case of jointly owned property
The notified ITR forms in ITR-1 and ITR-4 for AY 2020-21 has restricted the use of these forms in case the taxpayer owns a house property in joint-ownership with two or more persons.
The notification that notified the ITR forms did not clarify whether the joint ownership shall be interpreted under general laws or as per income tax laws.
However, the good news is that this restriction has been rolled back by the Income Tax department within a week of its notification.
By a Press Release dated January 9, 2020, the CBDT has granted relaxation in eligibility conditions for filing of Income-tax Return Form-1 (Sahaj) and Form-4 (Sugam) for Assessment Year 2020-21.
The press release states that a person who owns a property in joint ownership was not made eligible to file the ITR-1 or ITR-4 Forms who is otherwise eligible to file the ITR-1 or ITR-4 Forms.
After examining the representations, the Board has allowed a person, who jointly owns a single house property, to file ITR-1 or ITR-4 if he or she is otherwise eligible to file ITR-1 or ITR-4.
Hence, there is no restriction on the use of ITR-1 or ITR-4 by a person who owns a house property in joint ownership with one or more persons if he is otherwise eligible to file the said ITR forms. The changes notified in the ITR-1 and ITR-4 forms have been withdrawn.
Deduction u/s 80EEA for jointly owned properties
Budget 2019 has gifted the taxpayers an additional deduction u/s 80EEA of the Income Tax Act, 1961 of up to Rs. 1,50,000/- for interest paid on loans borrowed up to 31st March 2020 for purchase of an affordable house (residential house property only) valued up to Rs. 45 lakh.
Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs. 3.5 lakh comprising deduction u/s 80EEA up to Rs. 1.50 Lakh and existing deduction of Rs 2 Lakh u/s 24.
The same rule of division of the additional benefit of interest paid on the eligible loan will be allowed in the hands of all the co-owners in the proportion of the ownership ratio. This will apply if all the co-owners have contributed to the purchase price of the residential house property.
In case the co-owner has not paid or contributed any money in the purchase price of the property, the benefit of additional deduction will be available only to the person who has funded the purchase price.
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33 Comments
extremely well written article clarifying all doubts of income and taxation of jointly owned popety
ReplyDeleteThank you for your kind words
DeleteThanks for such a detailed explanatory article.
ReplyDeleteHas there been any clarity on whether joint ownership of property is to be based on general laws (Transfer of property Act etc) or Income tax laws?
My specific query is
- An assessee owns three properties (all under joint ownership as per General laws with other parties).
- However, as per the concept of co-ownership (IT Act), he is only co-owner in one of the properties.
- For the other two properties, he is not a co-owner as he has not contributed anything in the acquisition of those properties
- Then in this case, whether he is required to file ITR-1 or ITR-2 for AY 2020-21 (and consequently AY 2019-20 since with the rollback of the amendment, the applicability of ITR-1 is same for both AY 2019-20 and AY 2020-21).
Is this rationale correct - Since the assessee is not the co-owner of two of the properties, therefore he can only have income from a single house property (wherein he is the co-owner) and accordingly ITR-1 is applicable for him for both the AY 2019-20 and AY 2020-21 (assuming the assessee has no other source of income)?
If a persons is a owner or co-owner of more than one house property he cannt use ITR 1 both for for AY 2019-20 and AY 2020-21.
DeleteThanks. W.r.t your response, is the ownership or co-ownership to be determined on the basis of IT Act or General laws?
DeleteIt should be as per IT Act since income will be apportioned as per IT Act
DeleteI have purchased flat in 2003 and as my income was not much so my sister and dad was included in loan. My dad expired in 2007 and afterwards I got mutation done to remove their name. Recently I sold that flat and buyers bank gave sanctioned amount split into two. One on my name and other on my sister name. I had been paying all the EMIs till I had loan. Now I had purchased new flat and want to pay full amount ( contribution received from buyer bank to me and my sister account) in that house. Do my sister need to pay long term capital gain.
ReplyDeleteFrom the limited facts, it appears to me as 'Yes'.
DeleteMy mother want to sold a residential land property on her name which she had purchased for 7 lakh, 4 years back, now she is selling it for rs 30 lakh, and now she want to purchase another land property of 70 lakh as a co owner with me, investing all her capital gain and remaining would be shared by me, Would capital gain tax be exempted when she acts as a co owner.
ReplyDeleteCapital gains exemption is not available for new investment in land-be as a co-owner or single owner.
DeleteVery well written.thanks for explaining each point in detail
ReplyDeleteThank you for the compliment
DeleteWill daughters becomes co-owners for purpose of Income tax since they have equal rights in inherited property? property is jointly gifted to 4 sons excluding 2 daughters . However, daughters gave NOC at the time of sale on the request of buyer and they directly paid money to daughters. Now should proceeds to be divided in 6 or still 4 since gift deed contains only sons name and they sold the property
ReplyDeleteThanks for the article, its very well written
ReplyDeleteOne query though : if I have a flat in native which is not given on rent (i.e not occupied). At times, occupied by parents. Should this be considered as deemed let out property and need to pay the tax on the income assumed per current market rate?
your parent is occupying the house, so it is self occupied
Deletedoes Husband and Wife become co-owners of inherited property to avail exemption and avail 2cr + 2 Cr exemption in case capital gains are 4 crores?
ReplyDeletecan each one invest in 2 houses of 75 lakhs each i.e 1.5cr and remaining 50lakhs in bonds i.e. 2 cr investments each of capital gains generated from single property which gave 4 cr capital gains.
i recently sold a jointly owned property ( self and wife) which was purchased in 2003. loan was taken in single name for purchase. full payment was made from a joint a/c. all subsequent improvements cost was done from Joint bank a/c. when it was sold, the buyer paid TDS in both PAN numbers for equal amount. whether my wife can who got around 20 lacs as capital gain( share) , need to file a return as there was no income so far and she had not filed Return for long . full consideration of sale was received in joint bank a/c only. whether she also can make investments under 54EC and claim exemption for her portion.
ReplyDeleteBased on the given facts, Yes your wife has to file return of income. she can claim exemption u/s 54EC
Deletegood article which cover the lifecycle of house property.
ReplyDeleteHi sir,
ReplyDeleteI am planning to purchase land and construct residential house by availing Home loan . My spouse is also working. Hence I am planning to avail home loan in both the names with my spouse as joint borrower. I have 2 queries:
1. Since we both are joint borrowers in Housing loan, can we be treated as joint owners as IT act and claim exemption (Int and Principal in equal share) and divide rental income in equal share.
2. I do not own a house. Presently working in Bangalore and Planning to construct house at chennai with GF and FF (2 HOUSES). Can i treat the same as self occupied property and not include any income even if i rented the house.
We(me and my husband ) have a jointly owned self occupied house and right now only 1 is paying the loan amount so while filing ITR returns do we need to mention about co-owner in percentage ownership section?
ReplyDeleteDear Sujit
ReplyDeleteI had purchased a flat in Sep-2018 in my(Govt. employee) and my wife's(Pvt. employee) name.
Home loan is also on our names. But the 100% EMI is paid by myself (my bank a/c) only,
there is no contribution from my wife in EMIs.
Rent earned is shown 50%-50% in our tax returns (in FY 2018-19 ITR).
But in Dec-2019, my wife quit her job.
1. Can I claim 100% home loan interest now as she is unemployed ?
2. Can the rental income be claimed by me 100% or it still need to be 50-50% ?
Please elaborate the tax implications for FY 2019-20 and FY 2020-21.
Hi Sujit,
ReplyDeleteVery much knowledgeable article and brilliantly explained with examples.
I have one query...
Am owing one house property which is G+2 and my dad is Co-owner in the property. Two portions are owned by us and 1 floor we have given it for rent.
We have an housing loan for which and 100% paying the EMI amounts.
The rental agreement is in my dad's name and he has been filing the rental on the entire rent received. If the agreement is there in my dad's then we need to divide the rental incomes also in equal ratio and show in both the tax returns?
Query is not clear. In nutshell, as stated the tax-ability shall depend on the ratio of amount who has paid for acquiring the asset.
DeleteWonderful article.
ReplyDeleteI have a query.
In case of an inherited property, there are 3 co-owners. Thus none of them had paid for it.
Part of it has been let-out by one of the owners and that owner collects & retains the full rent. That owner also pays income tax on that full rent.
Do the other two co-owners also need to pay the income tax on that rent (as rent not collected or retained by them)?
Is it mandatory for the other co-owners to file ITR-2 and show this property in Schedule HP if they have no income from this house property (as rent not collected or retained by them)?
Thanks in advance.
Hi,
ReplyDeleteThanks for the informative article. It is clear from a tax point of view. However, if a jointly owned property has to be gifted to a relative for no consideration, a gift deed is required and stamp duty has to be paid. In the case of daughter in law to father in law, the duty is higher than what it is for son to father. Would the daughter in law as the joint owner have to pay stamp duty at a higher rate on 50% of the property even though she did not contribute any money for the purchase?
Is there any case laws with respect to this?
ReplyDeleteVery nicely elobrated.
ReplyDeleteMe and my wife purchased a built house in 47.2 lac . We are cowner and coborrower of the property. My wife is having first name in registry as well as in housing loan. I have paid 2.2 lac from my account and remaining was financed (45 lac) from the bank. Now the EMI is 17000. My wife is paying 5000 (deducted from salary as she was employee of same bank) and I am paying 12000 (through neft). I am in higher tax bracket. How much maximum can I claim the intrest portion. Now, We are residing in this house.
Thanks and Regards
Varun kumar
Maximum interest you can claim is the amount of interest paid upto Rs. 2,00,000/- in a financial year.
DeleteI have a query.
ReplyDelete1. We have a flat in a City, in name of my wife, me, daughter - paid for by me 66.6% and wife (working) 33.4%. In earlier years this shown as co-owned and ITR2 used for both in last two years. This house is tenanted to a company from two year plus , till now. They pay rent ( below 50000/- ,p.m.) after deducting TDS. We show that in our IT returns as above.
2. We purchased a secondhand flat at a different city and settled there permanently, since 4 years back. Here wife paid about 51% and me 49%. We are showing this as her self occupied in her IT return.
I ( singlename, my money and loan ) had an old house ( 1983-6) in native place , where these days we lived when visiting native place. I showed this as self-occupied except in some years when we had a tenant there, that time the rent ( small amount actually) was shown in my IT return. Now this house is sold and that will be reported in my return.
Now we have two flats , the second above , ( being residence) is my wife's self occupied , And, the first one above,now tenanted.
QUESTION :- Can I show the first flat above as my self- occupied and ignore rent income for both of us ? Or only for me, but report her portion of rent in wife's return ? And how to show after thetenants leave ( they will after few months ) ?
settle now
I want to purchase a residential house jointly with my wife. can I avail exemption of capital gains on sale of my residential house. Thanks with regards.
ReplyDeleteHi sir,
ReplyDeleteI have one doubt sir, I have to file income tax return in ITR 2.
There is capital gain in sell of house property for short term, but the property owned by two people. Sale of property reflected in both party ais and tis.
I have taken 50 50 percentage for both party.
But TDS for that capital gain available for one person only sir. If I claim that TDS defective notice came sir. Now I don't know what to do sir.
Tell the deductor to revise the TDS to allcate the same in respective name
Delete