Upgrad LLM

taxation of profit from sale of a house under joint ownershi

Software Engineer

Hi,

Please share some knowledge regarding joint ownership of a house:

1) If a house held under joint ownership is sold within 3 years of purchase, in what ratio is the profit added in the incomes of first and second holder.

2) Can the profits be shown as income: 100% vs 0% between Owner2 vs Owner1; although the home loan was applied as: 100% vs 0% between Owner1 vs Owner2

 
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Director

The capital gains arising out of sale of property shall be added in the hand of joint owners in the same ratio in which they held benefitial share in the property.

 

In normal circumstances, the share of each joint holder in profit is equal unless explicitly declared or established by sources of investment to the ulterior.

 

 
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Chartered accountant

The ratio of ownership will depend upon the provisions contained in the title deed.Since the owner of the property on transfer is liable to capital gains, you will have to go by the deed.As rightly pointed out by Mr. Vineet the share shall be taken as equal in the abscence of an indication to the contrary.

 

siva208@yahoo.com

 
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Dear Vineet,

Will the situation be different , if the Home Loan was raised by the husband from his employers with no contribution being made by the wife whose name is added in the Sale Deed as Joint Owner out of natural love and affection ?  However, the Sale Deed is silent on this.   It may not be out of place to mention that my Chartered Accountant did not approve of her issuing a Rent Receipt to her dauther in law.

What will be the extent of shares shown in this case?

Ashok Monga

 
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self employed

Your CA is right in not approving rent receipt issued by wife as she does not have any beneficial interest by not contributing any thing and the sale deed is silent on this issue. In any case she alone can not issue any rent receipt.

 
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self employed

It will be the 100% profit in the hands of owner 1. Reason being the owner 1 has contributed entire cost of the house and this valu is shown in his name only. Further the sale deed is silent then it will be in the ration of contribution made by each co-owner.

 
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Director

Dear Mr Monga

 

In this case it is absolutely clear that the 100% ownership is with husband as he has contributed towrads the cost of property. But I am surprised how the chartered accountanat can approve or dissacprove any rent receipt.

 

The Husband by a declaration can state that 50% ownership of the property belongs to wife and he has contributed on her behalf. In such case the 50% contribution made by husband will be deemed to be gift by husband to the wife. However, by virtue of clubbing provisions, any income arising to wife due to renting or transfer from such house shall be clubbed with the income of husband and taxed in his hand.

 
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