Now Reading: Bought a co-owner’s half of a property? Tax rules differ for each share
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Bought a co-owner’s half of a property? Tax rules differ for each share
Bought a co-owner’s half of a property? Tax rules differ for each share
If you buy a co-owner's 50% share in a jointly held property and later sell the entire asset, you must compute capital gains separately for each share. Experts say the two halves…
The Story in Brief
If you buy a co-owner's 50% share in a jointly held property and later sell the entire asset, you must compute capital gains separately for each share. Experts say the two halves have different acquisition dates and costs, so treating them as one can lead to errors. The holding period of each share, 24 months for long-term status, determines the tax rate. Long-term gains after 23 July 2024 are taxed at 12.5% without indexation. Short-term gains are added to your income and taxed as per your slab.
For example, if you bought the first 50% for Rs 30 lakh in 2022 and the second 50% for Rs 50 lakh in 2025, then sold the whole property for Rs 1.5 crore in 2026, the gain on the first half is long-term and on the second half is short-term. The Section 54 exemption applies only to the eligible long-term gain, not to the short-term gain. You must reinvest the proceeds in another residential house within the specified period to claim it.
The Indian Opinion
The taxman does not care that you now own the whole house. Each 50% share has its own birthday and price tag, and the holding period decides whether the gain is short- or long-term. This is not a loophole, it is a rule that can sting if you buy out a co-owner and sell soon after. Watch how the two capital gains are computed separately in your return; the real test will be whether the income-tax department accepts the split without a query.
Source: livemint.com
This story was synthesised by AI from the source linked above.
