Summary: When two persons jointly purchase immovable property but only one provides the consideration, the consequences under income-tax law, property law, contract law and the Benami Act must be examined separately. Under Section 393(1), Table Serial No. 3(i) of the Income-tax Act, 2025, the obligation to deduct TDS depends on responsibility for payment, not merely the number of names appearing in the sale deed. Although payment by one purchaser may support deduction by that person, contractual obligations and reporting requirements remain relevant. Section 45 of the Transfer of Property Act, 1882 determines joint ownership interests by reference to contributions, common funds and contrary contractual arrangements, while Section 2(d) of the Indian Contract Act recognises consideration provided by another person. The Benami Act requires examination of beneficial ownership, the source of funds and applicable family-member exceptions. AIS and TIS disclosures must also be reconciled with the registered deed, bank transactions and actual funding arrangements. A joint purchase funded entirely by one person can be legally valid, but consistent documentation is essential to establish ownership, comply with TDS obligations and address potential benami concerns.
- Income Tax: Payment Responsibility Determines the Obligation
- Full Deposit and Correct Reporting Are Separate
- Transfer of Property Act: Contributions and Agreed Ownership
- Contract Act: Consideration May Come from Another
- Benami Act: Who Enjoys the Beneficial Interest?
- AIS/TIS: Explain Ownership and Funding Separately
- Registration and the Practical Position
Income Tax: Payment Responsibility Determines the Obligation
For transactions governed by the Income-tax Act, 2025, section 393(1), Table Serial No. 3(i) corresponds to the earlier section 194-IA. Subject to applicable conditions, purchases from resident sellers attract 1% TDS on consideration or stamp duty value, whichever is higher, with the prescribed ₹50 lakh threshold. Consideration is aggregated across purchasers and sellers for testing that threshold.
The statutory focus is the person responsible for paying. Two purchasers need not invariably deduct equally.
If A genuinely bears the entire consideration, deduction wholly by A has an arguable statutory basis. However, where A pays B’s contractual share on B’s behalf, using A’s bank account does not alone determine the deductor. The deed, payment obligations and actual arrangement must be read together.
Full Deposit and Correct Reporting Are Separate
Earlier TRACES guidance required Form 26QB reporting for each buyer-seller combination for the respective share. Current Form 141, Schedule B, requires disclosure of all purchasers and ownership proportions.
Full, timely deposit against the correct seller’s PAN supports an argument against duplicate recovery of the same underlying tax. It does not automatically cure buyer-wise reporting errors. Correction, explanation and any associated consequences require separate examination.
A demand against B must establish B’s responsibility for payment or credit; joint title alone does not resolve this.
Transfer of Property Act: Contributions and Agreed Ownership
Section 45 of the Transfer of Property Act, 1882 provides default rules for joint purchases.
Where consideration comes from a common fund, ownership ordinarily follows each purchaser’s interest in that fund. With separate funds, ownership ordinarily follows respective contributions. Without evidence of either, equal interests are presumed.
These rules operate “in the absence of a contract to the contrary.” Therefore, an express equal-share clause can govern even where A provides all the money.
Section 45 determines proprietary interests; it does not independently allocate TDS liability or exempt the arrangement from the Benami Act.
Contract Act: Consideration May Come from Another
Under section 2(d) of the Indian Contract Act, 1872, consideration may move from the promisee or another person, provided it is at the desire of the promisor.
Accordingly, B’s acquisition does not fail merely because A provides the purchase money under the agreed arrangement. B has not contributed consideration; the seller nevertheless receives consideration.
Recording the funding arrangement and intended ownership helps establish the facts. Contractual validity, however, does not conclusively determine benami implications.
Benami Act: Who Enjoys the Beneficial Interest?
Under section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988, the relevant test requires property held by one person, consideration provided by another, and holding for the immediate or future, direct or indirect benefit of the funding person.
If B merely lends a name and holds the apparent share for A’s benefit, the Act can apply unless an exception operates. Payment by A alone does not establish every ingredient.
Exceptions cover acquisitions from an individual’s known sources in the name of a spouse or any child. For a brother, sister, lineal ascendant or descendant, both the funding individual and relative must appear as joint owners in a document, alongside the known-source requirement.
A genuine arrangement benefiting B requires examination on its facts. Neither a gift label nor payment “at B’s instance” is conclusive protection.
AIS/TIS: Explain Ownership and Funding Separately
The purchase may appear in both purchasers’ AIS, based on registration information and TDS reporting. Depending on the source data, the displayed amount may represent the individual share or the entire property value. An AIS entry does not itself prove that each purchaser funded that amount.
Each purchaser should reconcile the entry with the deed, bank statements and funding arrangement. Where appropriate, submit available feedback such as “Information is not fully correct” or “Information relates to other PAN/Year”, identifying the correct amount and other purchaser’s PAN. Do not deny genuine ownership merely because another person paid.
TIS reflects processed and accepted/source-confirmed information; feedback is not an assessment order.
A can explain full funding, while B explains the source of B’s acquisition through A, supported by documents. The seller claims the TDS credit; the buyer cannot claim that deposit as personal income-tax credit. Any deduction or exemption claimed by a purchaser must independently satisfy its statutory conditions.
Registration and the Practical Position
Registration does not settle each purchaser’s TDS liability or certify Benami Act compliance. Full TDS deposit addresses the revenue concern, but the Department cannot be assumed to overlook allocation errors.
A valid joint purchase can be funded by one person. The deed, contributions, beneficial ownership, TDS statements and AIS explanations should consistently reflect the actual arrangement.
