Let’s assume you have purchased a flat and included your wife as a joint owner of the property on registration documents. By becoming the joint owner of this flat, does your wife lose tax benefits on investments in another real estate property? Let’s find out.

Being named as a joint owner of a property doesn’t bar a taxpayer from tax benefits available due to investments in another property, according to a recent order of the Mumbai bench of Income Tax Appellate Tribunal (ITAT), The Times of India reported.

The tribunal held that such joint-ownership will not impact a husband or a wife’s eligibility to claim tax benefits under Section 54-F if he or she sells another asset and reinvest the money received from such sale into another residential property.

The case

The Tribunal’s order came in a case where a woman had sold agricultural land and reinvested the capital gains of Rs 61.6 lakh in a residential property. After making the reinvestment under the prescribed time limit, she had claimed exemption under Section 54F.

However, the Income Tax department had denied her the deduction of Rs 61.6 lakh on the ground that she was already joint owner of two residential properties – one with her husband and another with her father’s HUF.

Even as divergent past court decisions are available in this matter, the Mumbai bench of ITAT held that the woman could claim the tax exemption, according to a report by The Times of India.

Also Read: Can a woman file mental cruelty case against her ex-husband after divorce? SC decides

What’s the tax benefit under Section 54F?

Section 54-F of the Income Tax Act deals with long-term capital gains.

Under this section, you are allowed to save capital gains tax on selling an asset like land/flat or even shares. However, to claim this benefit, you need to reinvest the net sale proceeds from selling one asset into another residential property.

However, the total exemption that you can claim depends on how much amount you have invested in the new residential property. For instance, if you reinvest the full sale proceeds, you can claim full exemption from capital gains tax. But the tax exemption will be proportional if you reinvest only a part of the net sale proceeds in a new residential property.

There is another important condition that taxpayers need to know. That is, tax exemption on capital gains from selling an asset can be claimed by reinvesting in another house/flat only when you do not own more than one residential property.

In case you already own more than one residential property, this facility will not be available.

Also Read: Joint Home Loan Taxation: Husband or Wife – Who Can Claim Benefit?

Note for taxpayers

The above issue is still not fully settled as there are contrary rulings of various courts. It is important for taxpayers to make full disclosure, especially if they are a joint owner of any property, while filing Income Tax Return. Not doing so can lead to unnecessary hassles or penalties with the Income Tax department. Moreover, in complex cases like the above, it is better to consult a Chartered Accountant before filing returns.

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