It is very common that people use to purchase the house property (like flat, building etc) in joint name to ensure proper funding for the same and sometime for smooth succession thereof (e.g Generally husband and wife use to purchase property in joint name so that in case of death of any of the person the other spouse can have peaceful possession of such property).
Apart from the above, two or more person can become joint owner of a house property in one of the following ways:
1. Inheritance (through will)
2. Inheritance (without a will)
3. Gift (through a Gift deed).
In case of sale of such jointly owned house property, the capital gain arises to all the joint owners in the proportion of their share in the property.
For Example: Mr X and Mr Y are the joint owners of a house property with their share of 60% and 40%. The house property was acquired on 10.05.2002 for Rs 10,00,000. The said property is sold on 15.01.2019 for Rs 30,00,000 and expenses on transfer is Rs 50,000.
Find the capital gain for Mr X and Mr Y.
| FY | Cost Inflation Index |
| 2002-03 | 105 |
| 2018-19 | 280 |
Solution:
| Particulars | Total | Mr X | Mr Y |
| Sale Consideration | 3,000,000 | 1,800,000 | 1,200,000 |
| Less: Expenses on Transfer | 50,000 | 30,000 | 20,000 |
| Net Consideration | 2,950,000 | 1,770,000 | 1,180,000 |
| Less: Indexed Cost of acquisition (10,00,000*280/105) | 2,666,667 | 1,600,000 | 1,066,667 |
| Long Term Capital Gain | 283,333 | 170,000 | 113,333 |
How to calculate ownership ratio for House property:
It is very important to define ownership ratio of each co-owner to determine their tax liability. The ownership ratio can be determined as below:
1. In case of jointly purchased property- In case of jointly purchased property ownership ratio will be determined by the sum contributed by each co-owner to purchase the property. Mere mention of name of one of the joint person in the registry deed does not make him owner for the computation of Income under Income Tax Act.
2. If one of the co-owner has not contributed anything for purchase of property (mostly happens in case joint name is with house wife) then he/she will not be treated as co-owner.
3. In case of Inheritance (through a will)- In case two or more person become owner of the property by way of inheritance through will, then share of each co-owner will be determined based on the share mentioned in the will.
4. In case of Inheritance (without will)- In case two or more person become owner of the property by way of inheritance without a will (i.e interstate succession), then share of each co-owner will be determined based on law of succession applicable to such person which is based on their religion. However, in case some of the legal heirs have relinquished their right in the property by mutual consent, the ownership ratio shall stand modified to that extent.
5. Gift (through a Gift deed)- In case two or more person become owner of the property by way of Gift through a Gift deed, then share of each co-owner will be determined based on the share mentioned in the Gift deed.
In case the ownership ratio can’t be determined by any of the above methods then provisions of Sec 26 of Income Tax Act 1961 shall apply.
Sec 26 provides that if the share of each co-owner is definite and ascertainable then each co-owner will be liable to tax based on their share in the property. However where the share of each co-owner is not definite, then Income from House property will be determined and charged to tax in capacity of an AOP (Association of Person).
How to save tax on capital gain arisen on sale of House property:
The Long term capital gain arising on sale of house property is chargeable to tax @ 20%. However one can claim exemption u/s 54, 54EC or 54F in case of house property.
| Particulars | Sec. 54 | Sec. 54EC | Sec. 54F |
| Who is entitled | Individual/ HUF | Any person | Individual/ HUF |
| Use or Holding period | Long-Term | Long-Term | Long-Term. Should not own more than 1 house on the date of transfer |
| Asset Transferred | Residential house | Land or building or both. (w.e.f FY 18-19) | Any Asset other than Residential House |
| Amount to be invested | Capital gain | Capital gain (Investment in the year of transfer and next financial year = maximum Rs 50 Lacs) | Net Consideration |
| New Asset | One residential house in India | Specified bonds redeemable after 5 years (w.e.f FY 18-19) (Previously 3 years) in NHAI or RECL | One residential house in India |
| Exemption | Capital gain or amount invested whichever is lower | Capital gain or amount invested whichever is lower | (Amount Invested / Net Consideration) X Capital gain |
| Prescribed period for investment | Within 1 year before or 2 years after the date of transfer in case of purchase or within 3 years after the date of transfer in case of new construction |
Within 6 Months from the date of transfer | Within 1 year before or 2 years after the date of transfer in case of purchase or within 3 years after the date of transfer in case of new construction |
| Sale of new asset | STCG in case new asset is sold within 3 years from the date of purchase / construction. | LTCG in case new asset is sold within 3 years from the date of investment | LTCG in case new asset is sold within 3 years from the date of purchase / construction. |
| Scheme of Deposit | Available in case of unutilised amount | Not Available | Available in case of unutilised amount |
For Example: Mr X and Mr Y are the joint owners of a residential house property with their share of 60% and 40%. The house property was acquired on 10.05.2002 for Rs 40,00,000. The said property is sold on 15.01.2019 for Rs 2,40,00,000 and expenses on transfer is Rs 50,000.
Find the capital gain for Mr X and Mr Y.
Also calculate the exemption available in following cases:
1. Mr X and Y both invested Rs 60,00,000 each in NHAI bonds on 20.01.2019.
2. Mr X and Y both purchased flat of Rs 60,00,000 each on 20.01.2019.
| FY | Cost Inflation Index |
| 2002-03 | 105 |
| 2018-19 | 280 |
Solution:
| Particulars | Total | Mr X | Mr Y |
| Sale Consideration | 24,000,000 | 14,400,000 | 9,600,000 |
| Less: Expenses on Transfer | 50,000 | 30,000 | 20,000 |
| Net Consideration | 23,950,000 | 14,370,000 | 9,580,000 |
| Less: Indexed Cost of acquisition (40,00,000*280/105) | 10,666,667 | 6,400,000 | 4,266,667 |
| Long Term Capital Gain | 13,283,333 | 7,970,000 | 5,313,333 |
Case 1) Mr X and Y both invested Rs 60,00,000 each in NHAI bonds on 20.01.2019
| Particulars | Mr X | Mr Y |
| Long Term Capital Gain | 7,970,000 | 5,313,333 |
| Less: Exemption u/s 54EC (Max Rs 50 Lacs) | 5,000,000 | 5,000,000 |
| Taxable capital gain | 2,970,000 | 313,333 |
Case 2) Mr X and Y both purchased residential flat of Rs 60,00,000 each on 20.01.2019
| Particulars | Mr X | Mr Y |
| Long Term Capital Gain | 7,970,000 | 5,313,333 |
| Less: Exemption u/s 54 | 6,000,000 | 5,313,333 |
| Taxable capital gain | 1,970,000 | – |
Author Bio
property inhrited by four legal heir’s wants to sale what isbthe cpital gain effect. if the same property sold by relinquished/ authority letter by other three what is the effects of capital gain. if proerty gifted by three what is the ciptal gain
dear sir
we are three brother and sister
received joint property in inheritance now valuation of old property comes 10.00.000 so for considering long term capital gain tax we have to deduct 3.33 lakh from each or 10 lakh from each .
consideration is equal so deduction also should be equal
My father purchased 3 katha land at 5700/- in kolkata in 1979. He built a house of 1000 sqft on it in 1980. He built another storey on it of 1000 sqft in 1990. He died in 1992.My mother died in 2013. My sister and me sold the house in 2023 at 60 lacs. I got 30 lakhs. How much I have to invest in 54ec bond for tax exemption.
If the house property was held in Joint names of husband and wife, the down payment and Home loan repaid from husband’s accounts, sale proceeds is received 100% in husbands account and advance TDS deducted accordingly from husband account. however the form 26AS reflect 50:50 sale proceed in husband and wifes name. how to handle the income tax & treat capital gains?
I bought a house in my single name in 1993 for 3,58800 on 01.11.1993 and sold the flat on 7.10.2021.
I have now bought a flat Jointly with my husband..
Will I be exempted from LTCG.. please advice and also how much the indexation would amount to
If the house property was held in Joint names of husband and wife, the down payment and Home loan repaid from husband’s accounts, sale proceeds is received 100% in husbands account and advance TDS deducted accordingly from husband account. however the form 26AS reflect 50:50 sale proceed in husband and wifes name. how to handle the income tax & treat capital gains?
House property was sold in FY 2020-2021. The TDS was deducted by the buyer on full value and deposited with Tax authorities in 2020-2021 itself. However only about 60% of the sale value was received in 2020-21. Balance 40% was received in April 2021 only and the registration was done in April 2021 (FY 2021-2022). How to report the sale and LTCG in ITR for AY 2021-22??
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If the house property was held in Joint names of husband and wife, while the entire funds were invested, Home loan repaid from husband’s resources, sale proceeds received 50:50 basis and TDS deducted accordingly, how to report & treat capital gains?
purchased residential property in june 2004 for Rs 600000. Transfer charges Rs 30000. Renovation and one room built up charges Rs 200000. Sold this property on 07.11.2018 for Rs 750000.
Again purchased residential property on 28.11.2018 for Rs 9500000. Transfer charges Rs925000. Renovation amount 100000. If the property is sold on 01.12.2020, How LTCG will be calculated as i donot want to invest proceeds in new property.
I sold my property on 4.4.2019 for 1.35 crores (transfer chargers 25000/- extra) which was bought on 11.2.2002 for 10.20 lakhs jointly with my wife. And invested Rs.76 lakhs for buying another property on 2.05.2019 (other charges 6.46 lakhs extra). How much I should invest now in bonds under sec 54EC in each partners name. Please clarify