I own some property and earn some rent on it along with my husband and we file IT returns individually on the rental income. Though I singly own the plot of land we have been filing IT returns on the rents since 15 years on account of my husband having spent money for construction of the structure. Now we plan to sell the said property, can both my husband and I claim capital gains exemption since he will be signing the document as confirming party? Also can the sale proceeds be paid to both me and my husband equally ? Since we have been filing individual returns on the shared rental income, will there be a problem when I sell the property and my husband will no longer be able to file rental income return, he has no other income.
Irrespective of the fact that your husband has lend the money to you for construction of the super structure on the land owned by you, he cannot become the owner of the property and as such he cannot claim capital gains. Only you will be able to claim capital gains exemption.
As you are the single owner of this property, the capital gains will arise only in your hands and not in the hands of your husband. As Capital Gains will arise only in your hands – only you would be able to claim the deduction. Owning the property and filing the return of income are separate issues.Just because, yourself and your husband have jointly offered the shared rental income to income tax, that does not mean he becomes the owner of the property. I think you got this answer, by your question itself.
If you sell the property, the sale proceeds will be yours and you are liable for Capital gains exemptions, benefits and taxes and not your husband. If it is your long term plan and intention to file the returns jointly by offering the shared rental income, you can convert the title of your property from your name into the joint names, so that the ownership is shared between both of you.
In such a situation,
1) If you sell the property later on, the capital gains liability also gets shared between both of you.
2) You can offer the shared rental receipts in your respective IT returns, since the property belongs to both of you.
3) You can raise the loan from bank individually or jointly for making additions there on and pay EMI’s and take benefit of exemptions on repayment of housing loan and Interest payments on your bank loans.
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