Selling a Jointly Owned Property: Capital Gains and TDS for Each Co-Owner

A home held in two or more names is taxed owner by owner when it is sold. Each co-owner reports a part of the capital gain, claims a separate exemption and receives a separate credit for the tax the buyer deducts. This guide explains how the gain is divided, how the exemptions work for each owner, how the 1% TDS applies to joint buyers and sellers, and what to keep on record.

How the Gain Is Divided

The gain on a jointly owned property is worked out once for the whole property and then divided among the owners by their shares. Each owner is a separate taxpayer for that part. Two owners with equal shares each report half the sale price, half the cost and half the gain in their own returns.

The rules for working out the gain are the same as for a single owner. A home held for more than 24 months gives a long-term capital gain, taxed at 12.5% without indexation. A resident individual who bought the property before 23 July 2024 may instead pay 20% on the gain after indexation, if that gives a lower tax.

The guidance value matters as well. Where the stamp duty value is more than 110% of the agreed price, the stamp duty value is treated as the sale price. That higher figure is then divided among the co-owners in the same shares.

Which Share Counts

The starting point is the share written in the sale deed, such as 50:50 or 70:30. Where the deed is silent, the Transfer of Property Act sets the shares in proportion to the money each buyer paid. Where the payments cannot be traced, the shares are presumed to be equal.

The tax department also looks at who paid for the property. A spouse whose name was added to the deed without paying anything may be treated as holding that share on behalf of the one who paid. The gain on that share is then taxed in the hands of the spouse who funded the purchase, under the clubbing rules.

A mismatch between the deed and the money is the most common cause of trouble at the time of sale. The points below keep the two in line:

• State each owner's share as a percentage in the sale agreement and the sale deed
• Pay the down payment and the loan instalments from each owner's own account, in line with those shares
• Keep the bank statements, the loan statements and the purchase papers for as long as the property is held
• Record a gift of money between family members in writing at the time it is made

A Worked Example

A couple bought a flat in Bangalore in 2018 for Rs. 80 Lakhs, in equal shares, and each paid half. They sell it in November 2026 for Rs. 1.6 Crore. The gain on the whole flat is Rs. 80 Lakhs, before any indexation option is considered.

The figures for each co-owner are as follows:

• Share of the sale price: Rs. 80 Lakhs
• Share of the cost: Rs. 40 Lakhs
• Long-term capital gain: Rs. 40 Lakhs
• Tax at 12.5%: Rs. 5 Lakhs, plus cess

The total tax for the couple, at Rs. 10 Lakhs plus cess, is the same as for one owner selling the whole flat. The difference appears in the exemptions, which are counted for each person. That is where joint ownership can lower the final bill.

Exemptions for Each Co-Owner

Each co-owner may claim an exemption against that person's own share of the gain. The reinvestment must be made by the same person, in that person's name. The main reliefs are listed below with their numbers in the Income-tax Act, 2025 and the 1961 Act:

• Section 82 (earlier section 54): the gain from a house is invested in another house in India, bought within one year before or two years after the sale, or built within three years
• Section 85 (earlier section 54EC): up to Rs. 50 Lakhs of the gain from land or a building is invested in specified bonds within six months of the sale
• Section 86 (earlier section 54F): the net sale proceeds of a plot or other long-term asset are invested in a house, subject to limits on the other houses the seller owns

The limits apply to each taxpayer. In the example above, each spouse may put Rs. 40 Lakhs into the specified bonds, and the whole gain of Rs. 80 Lakhs is then exempt. A single owner with the same gain is limited to Rs. 50 Lakhs in bonds and pays tax on the remaining Rs. 30 Lakhs.

The Rs. 10 Crore cap on the cost of the new house also applies to each person. Co-owners may reinvest together in one new home, with each one's exemption limited to the amount that owner invests. Money that is still unused on the due date of the return goes into a Capital Gains Account, opened separately by each owner.

Tribunals and courts have differed on some points, such as how a part share in another house affects the section 86 relief. A chartered accountant should confirm each owner's claim before the sale proceeds are committed. The new home should be registered in the names of the same people who claim the exemption.

TDS When the Sellers Are Co-Owners

A buyer who pays Rs. 50 Lakhs or more for a property deducts 1% of the price as tax when the seller is resident in India. Since 1 October 2024, the Rs. 50 Lakhs test looks at the total paid for the property by all the buyers to all the sellers. A flat sold for Rs. 80 Lakhs by two co-owners is covered, even though each seller receives Rs. 40 Lakhs.

The buyer splits the deduction by the sellers' shares and reports it against each seller's PAN. On the Rs. 1.6 Crore sale above, the tax deducted is Rs. 1.6 Lakhs, of which Rs. 80,000 is credited to each spouse. Since 1 April 2026 the buyer reports it on Form 141, which replaced Form 26QB, and one form may list both sellers.

Each seller should give the buyer the correct PAN and the share in writing before the sale deed is signed. A deduction reported wholly against one owner's PAN leaves the other without a tax credit, and the correction takes time. Each seller should see the credit in the annual tax statement and receive a TDS certificate in Form 132 from the buyer.

A co-owner who is a non-resident is treated differently. Tax on that seller's share is deducted at the higher rates that apply to non-residents, while the 1% rate applies to the resident seller's share. Our NRI page covers property dealings by non-residents.

TDS When the Buyers Are Co-Owners

The same total-value test applies on the buying side. Two buyers who pay Rs. 80 Lakhs together must deduct 1%, although each pays Rs. 40 Lakhs. Each buyer deducts tax on the amount that buyer pays and reports it under that buyer's own PAN.

The number of forms follows the number of buyers. Two buyers file two forms, whether there is one seller or two, since one form may list several sellers. For a flat bought on a payment schedule, the forms are repeated for every month in which an instalment is paid.

The split a couple reports at this stage becomes part of the record of who paid what. It should match the shares in the deed and the money that left each account. The same split later supports each owner's cost when the property is sold.

Checklist for Co-Owners

These steps cover the points that most often go wrong in a joint sale or purchase:

1. Confirm the shares in the deed and gather proof of what each owner paid
2. Work out the gain for the whole property, then divide it by the shares
3. Compare 12.5% without indexation and 20% with indexation for each resident owner, where the property was bought before 23 July 2024
4. Decide each owner's reinvestment separately and note the last date for each
5. Give the buyer every seller's PAN and share in writing, and check the tax credit after the sale
6. Report the sale in each owner's return, and pay advance tax on the gain in the same tax year

The money from a sale is often the down payment for the next home. Our EMI calculator shows the loan instalment and the upfront costs for a new purchase. Ask us if a second look at the figures for a joint purchase would help.