Explained : Taxation of jointly held property
It is very common that people purchase house property in joint name. The general rule would be that the rental income from such property and the capital gain at the time of sale of such property, may be shared by all the joint owners as per the proportion of their holding in the property.
They may become joint owners by way of gift, inheritance etc. For example, If Mr. Nishant and sister Ms. Nishita inherit house property from their father. The Will mentions that Mr. Nishant and Ms. Nishita should inherit 50% of the property each. Accordingly, the rental income will be taxed in the hands of Nishant and Nishita equally. Whenever the house property will be sold, the sale consideration, expenses and cost of acquisition will also be split 50-50 between the brother-sister duo.
However, we notice that in some cases, the buyer of the house property adds his/her spouse’s name as a joint holder for various reasons such as smooth succession and availing tax benefits. In such cases, the spouse is treated as a legal co-owner of the house property as his/her name is mentioned in the purchase deed.
It is pertinent to note that for the purpose of income tax, the tax authorities look at the share of each spouse as different assessee. Over and above the legal ownership as mentioned in the purchase deed, the tax authorities look at the funding pattern for the property.