ITR Filing AY 2026-27: Can both husband and wife save LTCG tax on a jointly owned property?

One question that often arises among married couples is this – if a house was purchased in the joint names of husband and wife, but only one spouse paid for it, can both claim Long-Term Capital Gains (LTCG) tax benefits when the property is sold?

The answer is not as straightforward as many people assume.

While a property’s sale deed may show both spouses as owners, income tax laws look beyond names on paper. What matters is who actually funded the purchase and who is considered the property’s beneficial owner.

Why this question matters

Joint ownership of property is common in India. Couples often register a house in both names for convenience, succession planning or to avail certain benefits such as lower stamp duty in some states.

However, years later, when the property is sold and a capital gain arises, many assume that the gain can automatically be split between both spouses and that each can separately claim exemptions under provisions such as Section 54 or Section 54F.

Tax experts say that may not always be possible.

Ownership on paper is not the only factor

According to Pranav Sai S, Tax Expert at ClearTax, the tax treatment depends primarily on who actually paid for the property.

“The key concept here is beneficial ownership. Income from an asset belongs to the beneficial owner – the person who actually funded the purchase – not just the person whose name is on the property deed,” he explains.

According to him, if the husband paid the entire purchase cost of the property, the entire LTCG arising on sale would generally be taxable in his hands alone, even if the wife is listed as a joint owner in the property documents.

In such a situation, the husband alone would be eligible to claim capital gains exemptions available under Section 54 or Section 54F by reinvesting the gains in another qualifying asset.

He further notes that the sale proceeds and the subsequent reinvestment should also flow through the beneficial owner’s bank account.

What do Sections 54 and 54F provide?

These provisions allow taxpayers to reduce or eliminate LTCG tax under certain conditions.

Section 54 allows exemption from LTCG arising from the sale of a residential house if the gains are reinvested in another residential property within the prescribed time period.

Section 54F provides relief when LTCG arises from the sale of a capital asset other than a residential house and the sale proceeds are invested in a residential house.

Taxpayers can also claim exemption by investing eligible gains in specified capital gains bonds, subject to conditions and limits prescribed under the law.

For couples selling jointly held property, determining who can claim these exemptions becomes important because the benefit follows the person who is taxed on the gain.

When can both spouses claim LTCG benefits?

Rajiv Thakkar, Partner Direct Tax at Bhuta Shah & Co LLP, says the answer depends on the actual facts of each case.

He points out that in many households, a property is registered jointly in the names of husband and wife, but the entire purchase consideration and related expenses are borne by one spouse.

In such cases, the spouse who funded the purchase is generally presumed to have earned the capital gain and would therefore claim the corresponding tax benefits.

However, the situation changes if both spouses have actually contributed financially towards acquiring the property.

For example, suppose the husband initially made the payments but was later reimbursed by the wife from her own independent earnings. In that case, both spouses may be regarded as having contributed to the purchase.

According to Thakkar, if there is evidence of such contribution from the wife’s active income, both husband and wife can claim LTCG and corresponding exemptions in proportion to their actual contribution towards the jointly owned property.

In simple terms, tax benefits can be split only if the underlying investment itself was genuinely funded by both spouses.

A simple example

Consider a property purchased for Rs 50 lakh and later sold for Rs 1 crore.

Scenario 1: Husband paid entire purchase cost

Property is registered jointly.

Husband funded the entire Rs 50 lakh purchase.

Wife made no financial contribution.

In this case, the capital gain would generally be taxable entirely in the husband’s hands and he alone can claim exemptions under Section 54, Section 54F or eligible capital gains bonds.

Scenario 2: Both spouses contributed

Husband contributed Rs 30 lakh.

Wife contributed Rs 20 lakh from her own income and savings.

Property is jointly owned.

Here, the capital gain may be apportioned between both spouses based on their contribution ratio. Each spouse may separately claim LTCG exemptions on their respective share, subject to meeting the applicable conditions.

The exception taxpayers should know

Pranav Sai S highlights another important aspect.

Suppose the wife used her own funds—say from the sale of shares or another investment—to buy a property that was registered in the husband’s name. In such a case, she may still be considered the beneficial owner because she provided the funds.

As a result, she may be eligible to claim the relevant capital gains exemption, even though her name may not appear as the legal owner.

This once again underscores that the source of funds often carries more weight than the name appearing on the title deed.

What documents should taxpayers keep?

Tax professionals advise couples to maintain proper records showing who contributed towards the property’s purchase.

These may include bank statements, loan repayment records, income records of each spouse, fund transfer details.

Documents showing reimbursement or contribution by the other spouse

Such evidence can become crucial if the tax department seeks clarification regarding ownership and entitlement to capital gains exemptions.

Summing up…

For LTCG tax purposes, merely having a name on the property deed does not automatically entitle a person to claim capital gains exemptions. The tax benefit generally belongs to the person who actually invested in and funded the property.

If only one spouse paid for the house, that spouse would ordinarily be entitled to the LTCG exemption. However, if both husband and wife can demonstrate that they contributed towards the property’s acquisition from their own funds, both may be able to claim tax benefits in proportion to their contribution.

As taxpayers prepare their ITRs and review property transactions this filing season, understanding the distinction between legal ownership and beneficial ownership could help avoid mistakes and potential tax disputes later.

Disclaimer: This article is intended for informational and educational purposes only and should not be construed as tax, legal or financial advice. Tax implications may vary depending on an individual’s specific facts, ownership structure, source of funds, and applicable provisions of the Income-tax Act. Taxpayers should consult a qualified tax professional or chartered accountant before making any investment, property sale, or tax-planning decisions. The views expressed by experts are their own and are based on the information available at the time of publication.

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