Property owned by co-owners
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 24(1) of Income Tax Act 2025
24(1) For property co-owned with definite and ascertainable share, the co-owners shall not be assessed as an association of persons and their income computed separately as per their respective share under this Chapter shall be included in their total income.
Section 24(2) of Income Tax Act 2025
24(2) The relief available under section 21(6) shall be provided as if each co-owner is individually entitled to the said relief.
FAQs on Property Co-ownership and Taxation
Frequently asked questions (FAQs) on property owned by co-owners under the Income Tax Act, 2025, effective April 1, 2026:
1. Who is considered a co-owner under the Income Tax Act, 2025?
A co-owner is an individual who owns a property jointly with others and has a definite and ascertainable share in the property.
2. How is the income from co-owned property taxed?
As per Section 24(1) of the Act, each co-owner’s share is taxed separately, and they are not assessed as an association of persons (AOP).
3. What does “definite and ascertainable share” mean?
It means that the share of each co-owner in the property is clearly defined in legal documents such as a sale deed or agreement.
4. Are co-owners taxed as a group or individually?
They are taxed individually based on their respective share in the property’s income.
5. What happens if the share of co-owners is not defined?
If the share is not ascertainable, the property income may be assessed as an association of persons (AOP) and taxed accordingly.
6. How is rental income from co-owned property divided?
Rental income is divided in proportion to each co-owner’s share in the property.
7. Can each co-owner claim a standard deduction on rental income?
Yes, each co-owner can claim the standard deduction individually as per tax provisions.
8. Can each co-owner separately claim deductions on home loan interest?
Yes, as per Section 24(2), each co-owner can claim a deduction on home loan interest as if they were the sole owner.
9. What is the maximum home loan interest deduction for each co-owner?
Subject to limits under Section 21(6), each co-owner can claim deductions separately, based on their share in the loan and ownership.
10. Can co-owners claim tax benefits if the property is self-occupied?
Yes, each co-owner can claim applicable tax deductions based on their share in the property and loan repayment.
11. How is capital gains tax calculated when selling co-owned property?
Each co-owner is taxed separately on their share of capital gains based on their ownership percentage.
12. Can each co-owner claim an exemption under Section 54 on capital gains?
Yes, each co-owner can claim capital gains exemption under Section 54, provided they invest their share of proceeds in another property.
13. How is the cost of acquisition determined for each co-owner?
The purchase cost is divided among co-owners in proportion to their ownership share.
14. Can co-owners invest their respective capital gains in separate properties?
Yes, each co-owner can invest their share of capital gains independently for exemption purposes.
15. Is co-ownership recognized for property held jointly by family members?
Yes, as long as each co-owner’s share is definite and ascertainable.
16. Do all co-owners need to file tax returns separately?
Yes, each co-owner must report their share of rental income, deductions, and capital gains in their own tax return.
17. Does joint property ownership affect tax liability in case of a dispute?
If the share is disputed or undefined, the income may be taxed as an AOP rather than individually.
18. What happens if a co-owner transfers their share to another person?
Such a transfer is subject to capital gains tax, and stamp duty may apply based on state laws.
19. Can co-owners avail benefits under affordable housing schemes?
Yes, if they meet the eligibility criteria and their individual share qualifies under the scheme provisions.
20. How is property tax liability divided among co-owners?
Property tax liability is usually split based on ownership percentage unless agreed otherwise.
The Income Tax Act, 2025, effective from April 1, 2026, provides clear taxation rules for co-owned properties. As per Section 24(1), co-owners with a definite and ascertainable share are taxed individually rather than as an association of persons (AOP). This ensures that each co-owner’s income and tax liability are computed separately based on their respective ownership percentage.
Additionally, Section 24(2) allows co-owners to claim deductions and exemptions independently, including home loan interest deductions and capital gains tax exemptions. This provision prevents any undue tax burden and ensures fair treatment of co-owners under the tax law.
In summary, co-owners must maintain proper documentation to establish their ownership share, file their tax returns separately, and maximize their tax benefits under the Act. Understanding these rules helps avoid unnecessary tax complications and ensures compliance with income tax regulations.
