Capital Gains on Joint House Property
This query is : Resolved
14 February 2024
Dear Experts,
I need your advice on the following tax matter on capital gains on joint property
I bought a flat in 2009, which was registered jointly in my name and my wife's name. However, the entire value was fully financed only by me, a small component from my savings and around 90% from the housing loan. The payments for the housing loan were also made by me out of my salary, including the early settlement amount made to foreclose the loan. The joint registration was done only to facilitate hassle-free transfer in an unlikely event. No amount was paid by my wife for this house property.
Further, I had mentioned 100% ownership of this property in all my income tax returns and declared the income from rentals fully under my name. In 2014 I sold this property and full consideration was received in my bank account after TDS which was deducted under my PAN only. I had declared the full capital gains in my return. Since I had reinvested the amount in a new house property (registered only in my name) there was no capital gains tax.
IT department has initiated a show cause notice in my wife's name seeking clarification as to why the department should not consider 50% of the sale proceeds as capital gains under her name. When I checked with few friends who are CAs, they said if a joint owner has not funded for the house property, the taxability lies in the hands of the other joint owner(s) only. I am looking for solid grounds to defend my case. Are there any provisions in the law, or circulars, clarifications, court cases for me to do so.
Appreciate receiving a reply.
Thanking you all in advance,
Regards,
I need your advice on the following tax matter on capital gains on joint property
I bought a flat in 2009, which was registered jointly in my name and my wife's name. However, the entire value was fully financed only by me, a small component from my savings and around 90% from the housing loan. The payments for the housing loan were also made by me out of my salary, including the early settlement amount made to foreclose the loan. The joint registration was done only to facilitate hassle-free transfer in an unlikely event. No amount was paid by my wife for this house property.
Further, I had mentioned 100% ownership of this property in all my income tax returns and declared the income from rentals fully under my name. In 2014 I sold this property and full consideration was received in my bank account after TDS which was deducted under my PAN only. I had declared the full capital gains in my return. Since I had reinvested the amount in a new house property (registered only in my name) there was no capital gains tax.
IT department has initiated a show cause notice in my wife's name seeking clarification as to why the department should not consider 50% of the sale proceeds as capital gains under her name. When I checked with few friends who are CAs, they said if a joint owner has not funded for the house property, the taxability lies in the hands of the other joint owner(s) only. I am looking for solid grounds to defend my case. Are there any provisions in the law, or circulars, clarifications, court cases for me to do so.
Appreciate receiving a reply.
Thanking you all in advance,
Regards,
19 February 2024
Your wife can very well demonstrate the above facts in her reply giving your PAN details...and since it was financed by you, though she appears as a joint owner, all the income had to be clubbed in your income only. refer clubbing provisions of income tax act
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