Tax on what you own
For most families that means one property, held in two names. It carries a relief nothing else you own does - reinvest the proceeds in another home and the gain can be exempt under Section 82 (earlier Section 54) - and it is the relief most often refused. Two ITAT rulings show exactly why.
Your name on the registry does not prove ownership for income tax. Money proves it - who paid how much. If the sale deed, the bank trail and Form 26QB do not tell the same proportional story, the department has grounds to tax your co-owner's share in your hands.
The assumption most couples make
Section 82 (earlier Section 54) exempts long-term capital gains on a residential property, provided you reinvest the proceeds into another residential property within the stipulated timeline.
When a property is jointly owned, most couples assume the exemption simply flows to each co-owner on their share. In principle that is correct. The problem is that joint transactions get their own scrutiny process, and the exemption can be denied where the paperwork does not independently support each co-owner's claim.
The relief is real and widely used. What trips people up is never eligibility - it is evidence: being able to show, document by document, that the person claiming it is the person who paid.
No. The deed establishes that two people are on the title; it does not establish what each of them paid. The department treats the funding trail as the evidence of ownership, so a deed with no matching bank record behind it is exactly the gap the two cases below turn on.
Put plainly: the department follows the money, not the deed. A name added for convenience - and the addition is very common - does not by itself create a share. Your share is what you paid for and can prove, not what the deed says.
Section 24 (earlier Section 26) splits it for you: where the shares are definite and ascertainable, each co-owner is taxed on their own share of the rent - even if the rent agreement carries one name and the whole amount lands in one account. What it will not do is invent a share. Where the deed is silent, an equal split tends to be presumed, which is rarely what either of you intended.
So state the share in the deed, and let the same split run through the rent agreement, the account the rent is credited to and the tenant’s TDS. Purchase is the easy part. Rent and sale are what test whether the property was ever really joint.
The three things an assessing officer looks for
Each one is backed by a separate ITAT ruling, and each has been used to deny a claim.
Two couples. Two gaps. Two avoidable appeals.
Both couples won at the ITAT. Both had to fight a formal appeal that the right paperwork at purchase time would have prevented.
Hariprasad Vedasubramanian vs ITO
Tejal Kaushal Shah vs ITO
Winning an appeal is not the same as not having one. Each of these ran through a reopened assessment and a formal ITAT appeal, with the tax demand standing in the meantime. The documentation is what keeps you out of that process, not what wins it.
One rule closes all three gaps
Every document in the transaction has to reflect the same ownership ratio. Hold that, and there is no inconsistency left to exploit.
All three must match - at purchase, and again at reinvestment.
That is fine, and common. The rule is not that you must pay equally - it is that the deed must state the unequal ratio you actually paid, and the bank trail and Form 26QB must reflect the same split. Tejal Shah's case succeeded precisely because a 76/24 split was documented consistently.
Do this every time, without exception
What if the deed never said who owns how much?
Almost nobody reads this guide while buying. They read it while selling - and by then the deed either says nothing at all about how the flat is split between the two of you, or it says half each when one of you paid for all of it.
The instinct is to go back and fix the deed. That is usually the wrong move, and it is not the only one available - because the split is decided by who actually paid, not by what the deed says. In most cases the work is proving what already happened, not re-papering it.
A rectification deed corrects a factual error - a misspelt name, a wrong flat number. It cannot re-cut ownership. Moving a share genuinely requires a gift, relinquishment or partition deed, and that is a fresh transfer: stamp duty on the share that moves, a new acquisition date for it, and the holding period restarting on that portion.
Between spouses there is a further problem. Where the share moves without adequate consideration, Section 99(1)(a)(ii) (earlier 64(1)(iv)) clubs the income and the gain straight back to whoever funded it - so the document costs money and changes nothing. And a deed executed weeks before a sale reads exactly like what it is.
This is the easier case. Where a deed says nothing, an equal split is presumed - and if you genuinely did pay equally, that costs you nothing at all.
Where you did not, assemble the trail that already exists and was created at the time: bank statements for the down payment, the loan sanction letter and who the co-borrowers were, the account the EMIs were debited from, and the Form 26QB filed at purchase. Then report the gain in that ratio, consistently, in both returns. Contemporaneous evidence is what carried Tejal Shah’s appeal; a ratio asserted for the first time in a reply to a notice is not evidence.
Then the whole gain is very likely that person’s, and both returns should say so. Splitting it half-half to lower the bill is the exact fact pattern the department reassesses - and it is how a name added for convenience turns into an appeal.
There is a compensation, though: if the whole gain is yours, the whole Section 82 (earlier 54) reinvestment is yours too. Buy the new property in your name, pay for it from your account, and the exemption follows the gain cleanly.
Not necessarily. A revised return is available until the deadline for that tax year (assessment year under the old Act); past it, an updated return under Section 263(6) (earlier 139(8A)) is the route, and it carries additional tax on the difference.
Both are materially better than being found. The two couples in the cases above each won - and each paid for an appeal to do it.
The rule does not change because you are late to it. Deed = bank trail = 26QB, still. You are simply proving the split after the fact instead of setting it in advance - which is slower, weaker, and occasionally impossible.
Old and new section numbers
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026 and gave its sections new numbers. This table gives the new number for each section this guide cites.
Sources
- Section 82, Income-tax Act, 2025 (earlier Section 54, Income-tax Act, 1961) - exemption on long-term gains reinvested in a residential property.
- Hariprasad Vedasubramanian vs ITO, ITAT Mumbai, 2026 - whole gain taxed in one co-owner's hands where the other's share was not independently documented.
- Tejal Kaushal Shah vs ITO, ITAT Mumbai, April 2025, ITA No. 3303/Mum/2024 - Section 54 restored on the strength of the bank trail.
- Sections 22(1)(b) and 123, Income-tax Act, 2025 (earlier 24(b) and 80C) - home loan interest and principal, where both co-owners are borrowers.
- Section 24 (earlier Section 26) - income from co-owned property is assessed on each co-owner in their own share, where the shares are definite and ascertainable.
- Section 99(1)(a)(ii) (earlier Section 64(1)(iv)) - income from an asset transferred to a spouse without adequate consideration is clubbed back with the transferor.
- Section 263(6) (earlier Section 139(8A)) - updated return, available after the revised-return deadline, with additional tax.