Tax calculations for jointly-owned properties

A jointly-owned property is one that is held under the name of two or more parties who can be spouses, blood relations, business partners or just friends. When spouses own a property together, it comes under marital status. The joint owners must all comply with TDS (tax deducted at source) rules.



TDS rules in sale of jointly-owned property

# Income-tax is not levied as a group but on respective co-owners individually as per the joint party’s new TDS rules.

# In case of two partners, both will hold equal and legal ownership of the residential property as stated in the registered documents.



# In case of joint property ownership by two or more parties, they are all entitled to TDS benefits on the principal and interest sums. According to Section 80C of the Income-Tax Act, the co-owners are entitled to a benefit of Rs 1.5 lakh per person annually on the principal amount and a maximum of Rs 2 lakh on the interest amount.

# While depositing TDS, each of the joint owners must produce legal documents, specifically, the PAN or Permanent Account Number.

# While in a regular case with PAN, TDS is deducted at a rate of 1%, if the seller cannot produce a PAN, it shoots up to 20%.

Tax exemptions in capital gains from jointly-owned property

# Section 54EC: This section allows up to Rs 50 lakh exemption from long-term capital gains on the sale of a residential property if the amount is invested in another property within two years of the sale.

# Section 54F: This allows an exemption from long-term capital gains on the sale of a residential property going up to Rs 2 lakh if the kitty is invested in a National Pension Scheme (NPS) within two months of the sale.

# Section 54GB: This section permits exemption going up to Rs 1 crore from long-term capital gains in a residential property sale if the sum is invested in a listed infrastructure project within three years of the sale.



Things to remember

# Properties that are jointly owned, are taxed individually, not as a group.

# It is the responsibility of each co-owner to pay taxes on his/her share of the property’s income and capital gains.

# The liability of TDS for jointly-owned properties are usually divided among the co-owners in keeping with the proportion of their ownership share.

# It is possible for co-owners to claim TDS benefits on the principal and interest amounts, subject to specified ceilings.

To sum up

So, clearly, while buying immovable properties in joint names, it is absolutely critical to find out about compliance with TDS rules and its various applications. At Pioneer Property, our experienced team is always ready to guide you in this important matter.