ITAT rules on tax benefits for co-owned property purchases

The Mumbai Income Tax Appellate Tribunal (ITAT) has ruled that tax benefits on jointly owned property depend on actual financial contribution, not just ownership share. In Himanshu Manoranjan Bhatt v. ITO, the taxpayer sold a property for Rs 72.83 lakh and bought a flat for Rs 1.37 crore jointly with his wife. The assessing officer allowed only half the purchase price as investment, but the ITAT said the exemption under Section 82 of the Income Tax Act 2025 applies to the amount actually funded.

Separately, the ITAT ruled in favour of a woman who bought her husband's property worth Rs 7.5 crore using long-term capital gains from selling shares. The tax department denied her Section 54F exemption, calling the transaction a colourable device. The tribunal found no evidence of pre-arranged tax avoidance and allowed her claim of around Rs 6.92 crore.

Experts say co-owners must maintain clear payment trails and bank statements. The interest deduction on joint home loans follows actual payment by each spouse, not the ownership ratio. The rulings reinforce that adding a spouse's name to a property does not automatically split tax benefits equally.