Interpretation
For the purposes of sections 20 to 24, the “owner” in relation to a property shall include––
(a) an individual who transfers without adequate consideration, any property to the spouse (except under an agreement to live apart), or to a minor child (other than a married daughter);
(b) the holder of an impartible estate;
(c) a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association;
(d) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882;
(e) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or its part—
(i) by virtue of transfer of such property by way of sale or exchange or original or extendible lease for a term of not less than twelve years; or
(ii) accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease which has the effect of enabling the enjoyment of such property.
Notes on Section 25 of Income Tax Act 2025
Explanation of Section 25 of the Income Tax Act, 2025
Section 25 of the Income Tax Act, 2025, defines the term “owner” for the purpose of sections 20 to 24. This section broadens the legal definition of an owner beyond the conventional notion of legal titleholder and includes individuals who, under various circumstances, exercise rights of ownership over a property.
Key Interpretations of Ownership under Section 25
- Transfers Without Adequate Consideration
- If an individual transfers a property to their spouse (except under an agreement to live apart) or a minor child (except a married daughter) without adequate consideration, they will still be considered the owner for tax purposes.
- This provision is designed to prevent tax evasion through transfers within the family.
- Holder of an Impartible Estate
- The holder of an impartible estate (a type of property that cannot be divided among heirs) is considered the owner, even though it may be inherited in a specific manner.
- Members of Housing Societies, Companies, or Associations
- If a building (or part of it) is allotted or leased to a member of a cooperative society, company, or association under a housing scheme, the member is considered the owner for tax purposes.
- This applies even though the legal title may rest with the society or company.
- Possession Under Part-Performance of a Contract (Section 53A of the Transfer of Property Act, 1882)
- A person who takes or retains possession of a property in part-performance of a contract (such as a sale agreement where full payment or legal formalities are pending) is deemed the owner.
- This prevents tax avoidance in cases where property is “sold” but the legal title is not transferred immediately.
- Acquiring Rights in a Property Without Legal Ownership
- A person acquiring rights in a property (except short-term leases) is considered the owner if:
- They receive the property through sale, exchange, or a lease for 12 years or more.
- They acquire rights indirectly through shares, memberships, agreements, or arrangements that grant them the enjoyment of the property.
- This prevents individuals from structuring transactions in a way that allows them to enjoy property benefits while avoiding ownership-based taxation.
- A person acquiring rights in a property (except short-term leases) is considered the owner if:
Purpose of Section 25
This section ensures that tax liability remains with the person actually enjoying the benefits of the property, rather than allowing ownership to be structured in a way that avoids taxation. It prevents tax avoidance through transfers within families, membership-based property ownership, and deferred legal transfers.