Treatment of Income from Co-Owned Property Section 26
What is Co-Ownership?
- When a house property is jointly owned by one or more persons then each joint owner is known as co-owner. In a similar manner, Co-ownership means where a single house property is owned by more than one person.
- In India, it is very common to own a house property jointly for availing a higher loan amount. The income tax implications are different for joint owners of house property as well.
- With Reference to Section 26, it says that when two or more persons own the property and their respective shares are definite and ascertainable, the share of each such person shall be assessed separately for computing the house property income.
In case of Self-Occupied Property
- The annual value of the property of each co-owner will be nil and will be entitled to a deduction of Rs.30,000/Rs. 2,00,000 as the case may be on account of interest on borrowed capital. Click here to read more
- Also, if the co-owner owns another self-occupied/unoccupied property the aggregate interest cannot exceed Rs.30,000/Rs.2,00,000. Click here to read more
In case of Let out Property
- The income from such property shall be computed as if the property is owned by one owner and thereafter the income so computed shall be apportioned amongst each co-owner as per their specific share.
Let’s Understand with an example:
Suppose a person takes a loan of Rs. 50,00,000 which is not a very significant amount these days from a bank for 15 Years. The EMI on this loan comes out to be approximately Rs. 7,00,000 per annum.
As per Income tax act, a person can avail a benefit of Rs. 2,00,000 per year per person on interest paid on the home loan. If a person wants to take maximum benefit, he can co-own the property in the name of two earning members, each availing a benefit of Rs. 2,00,000 per year.
Thus, by co-ownership they avail a benefit of Rs.4,00,000 instead of only Rs. 2,00,000 in case of single ownership.
Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.