Can Joint Property Owners Claim Separate Capital Gains Tax Benefits?

ET Wealth Reader's Query: In 2025, I sold a residential property, which was purchased in 2008 in the joint names of my wife and I. However, my wife did not contribute financially to the purchase. I would like to know if both of us can claim long-term capital gains tax benefits.

These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.

In 2025, I sold a residential property, which was purchased in 2008 in the joint names of my wife and I. However, my wife did not contribute financially to the purchase. I would like to know if both of us can claim long-term capital gains tax benefits.

Umesh Kumar Jethani Founder, ApkiReturn: Under the Income Tax Act, long-term capital gains are taxable in the hands of the person who actually bore the cost of acquisition, regardless of whose name appears on the title deed. Since you alone funded the entire purchase of the property in 2008, the capital gains from its sale in 2025 would be taxable entirely in your hands, even though it was held jointly with your wife.

Your wife cannot claim a separate exemption or benefits on this transaction as she did not contribute financially to the acquisition. The Income Tax Act follows the principle of ‘real ownership’ rather than nominal ownership for capital gains taxation. Therefore, you alone can claim available long-term capital gains tax benefits, such as exemption under Section 54 (by investing in a residential property) or Section 54EC (by investing in specified bonds), provided you fulfil the prescribed conditions. For taxation purposes, you have to maintain clear records establishing that you were the sole contributor to the property’s purchase price.

ALSO READ | Will Rs 32 lakh EPF corpus withdrawal be tax-free? Are there better options than withdrawing?

I was allotted a flat in September 2023 and registered it in March 2026. I plan to sell it this year and use the proceeds to buy another flat due for completion in 2028. Will I have to pay capital gains tax, or can I claim an exemption?

Rushabh Desai Founder, Rupee With Rushabh Investment Services: Since your flat was allotted in September 2023 and you’re selling it this year, it will attract long term capital gains (LTCG) tax. LTCG on property is taxed at 12.5% along with surcharge and cess. Indexation is no longer available for properties acquired on or after 23 July 2024. However, since your allotment was in September 2023 (before 23 July 2024), for immovable property, a comparative option exists: 20% with indexation vs 12.5% without indexation.

You need to compare both methods and pick whichever is lower. Section 54 allows you to claim a tax exemption when you sell a residential property and reinvest the gains into buying another residential property. The seller must purchase another residential house within 1 year before or 2 years after the sale or construct a new house within 3 years from the date of sale. Your situation fits well as your second flat is due for completion by end 2028, that’s within the 3-year construction window from the date of sale.

The exemption is revoked if you sell the newly purchased property within 3 years of buying /completing it and the maximum exemption is capped at `10 crore. I strongly recommend engaging with a chartered accountant /tax consultant to verify all the details and the exact computation.

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: [email protected]

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

(Join our ETWealth WhatsApp channel for all the latest updates)