“Advocate for the extension of Section 54F benefits to joint ownership with spouses and joint home loans. Explore a case study where exemption is denied, understand the issues, and review relevant case laws. Encourage joint property ownership for socio-economic empowerment. Call for clarity from the tax authorities to prevent litigations and provide relief to taxpayers facing genuine hardships under beneficial provisions like Section 54F.”

54F should be allowed for joint ownership with spouse and funding through joint home loan

Mr A and Mrs. S are husband and wife. They have two minor daughters. Mr A is a salaried individual whereas Mrs. S takes the  responsibility of managing home and also takes home tuitions.

Mr A invested shares of Rs 5,00,000 in FY 2016-17 in the name of S (gift of shares given as “shagun” after child birth)

A purchased a house property for Rs 50 Lakhs in March 2022 (FY 2021-22).  (Rs 20 Lakhs from his personal funds and Rs 30 Lakhs through joint home loan).

S sold the shares in June 2022 for Rs 50 Lakhs which is also the long-term capital gain for her. The money was credited in her account and the home loan was disposed off.

The property was purchased in joint name between husband and wife. The name of wife is added in the property, as parents are the only care-takers of their daughters with no other family support and also due to increasing uncertainties because of COVID.

Mr A claims exemption under section 54 F for the purchase of house property after application of clubbing provisions of section 64(1)(iv) in his ITR.

AO disallowed the exemption under section 54F on the following grounds –

1. The house property was not purchased by the assessee in his own name and it is in the joint name with spouse.

2. The house property is funded by joint home loan with spouse.

Issues

i) Section 54 and 54 F are beneficial provisions. The language of section is clear and does not put any such restrictions regarding “name of owner” and “exact source of funding”, of house property purchased.

However, there are divergent views expressed by various High Courts and other Income Tax Authorities in various litigations.

It has led to numerous litigations and leads to genuine hardship in case of assessees, to give effect to a beneficial provision.

ii) Joint ownership of property and joint management of responsibilities between spouses (for example, Joint loan) should be encouraged in the current socio-economic environment.

In the above case, Mr A is now discouraged to share any joint ownership with his spouse and now he is planning to close the joint bank account that he holds with his wife.

Some Relevant Cases Laws

Section 54F exemption on house purchased in the name of assessee’s wife & son allowed

ITAT Restricted section 54 exemption as investment in house property was done jointly

Section 54 exemption cannot be denied to HUF merely for purchase of property in the name of member

Section 54 exemption denial on property purchases in Sons name- AO should follow view of jurisdictional HC

No section 54 deduction on Property purchased in the name of married daughter

Section 54F Deduction not deniable for mere mention of Name of Spouse in Purchase deed

Exemption u/s 54 allowed if purchase amount paid by assessee irrespective of name on agreement of Son

No Section 54 Exemption denial for Purchase of new property in the name of son

Section 54/54F exemption eligible on investment in new property in Wife’s name

HUF cannot be denied Section 54F exemption for Purchasing Multiple residential units

No Section 54F exemption on House purchased by Wife from her fund

Section 54F Exemption allowable even if new residential house is purchased in wife’s name

Section 54F deduction eligible on house property purchased in wife name

Section 54F exemption eligible on residential house in daughter’s name

Suggested Resolution

Clarification by the Board in case of “joint ownership” and “joint home loan” will avoid the litigations between the department and tax payers, in giving effect to provisions of section 54 and 54 F.

Author Bio

Qualification: CA in Job / Business
Company: Zentangle Tax Solutions
Location: Bengaluru, Karnataka, India
Member Since: 09 Feb 2023 | Total Posts: 4
Shweta Jain is the Founder and Proprietor of Zentangle Tax Solutions. She is a seasoned Chartered Accountant with extensive experience, having previously worked at EY, now leads her own venture, Zentangle Tax Solutions. She is passionate about providing individuals and businesses with comprehensiv View Full Profile

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