News: Joint Owners Can Claim Section 54 by Actual Contribution-22-08-2026

Couples and family members often register a home in joint names even when one of them pays most or all of the price, with the other added for security, succession planning or as a family decision. A recent ruling by the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) clarifies how capital gains and exemptions may be divided in such cases when the property is sold.

The tribunal held that tax treatment need not be decided solely by the names on the title deed. Actual financial contribution and underlying economic interest can be relevant in determining tax liability and eligibility for exemptions such as those under Section 54.

In the case, the wife contributed Rs 1.76 crore and her husband Rs 55 lakh towards a residential property worth Rs 2.31 crore. The tribunal considered these respective contributions and did not automatically treat the ownership as 50:50.

Tax experts said joint ownership can bring several benefits. If such a property is financed through a housing loan, both spouses may claim eligible interest deductions under Section 24 and principal repayment benefits under Section 80C, subject to conditions and individual limits. If it is rented out, rental income can generally be apportioned by ownership share and taxed separately in each spouse’s hands.

Vivek Jalan, Partner, Tax Connect Advisory Services LLP, said the proportionate approach secures fairness and avoids disputes. Joint ownership also offers succession benefits, he said, and couples should treat joint property as a structured tax-planning instrument as well as a family asset.

Suresh Sadgopan, founder of Ladder7 Financial Advisories, said the ruling sets a precedent for couples to claim capital gains according to their contributions, so they should keep clear accounts of what each paid. He cautioned that this is the income tax position and not necessarily the position on property ownership and inheritance.

Amarpal Chadha, Tax Partner, EY India, said the ruling in Tejal Kaushal Shah v. ITO shows that tax benefits and exemptions in joint ownership should follow actual economic ownership and financial contribution. He advised couples to document their contributions, ownership interests and funding arrangements from the outset and reflect them consistently in their income tax returns. Bank statements, loan repayment details and purchase documents are critical for substantiating exemption claims and defending positions during scrutiny, he said.

Chadha added that exemptions under Section 54 of the erstwhile Income Tax Act, 1961 (Section 82 of Income Tax Act, 2025) should be claimed in proportion to each co-owner’s investment, which calls for alignment between legal ownership, beneficial ownership and tax reporting.

For co-owners, the ruling carries three lessons. The Section 54 exemption may, in certain circumstances, follow each person’s actual contribution. Being named on the documents does not always mean equal financial ownership. And where the two differ, a clear paper trail of bank statements, loan records, EMI payments and details of how the purchase and sale proceeds were funded, consistent with tax filings, becomes important.