Clarification on Tax Benefits for Joint Property Owners under Section 54F.

When an individual or Hindu Undivided Family (HUF) sale on a property, they can claim a tax break under Section 54F of the Income-tax Act if the funds are used to purchase a new residential home.

One of the conditions to avail of this tax benefit is that the taxpayer shouldn’t own more than one residential property at the time of selling the original asset.

A recent decision by the Mumbai bench of the Income-tax Appellate Tribunal (ITAT) has provided good news to persons who jointly own a property. This decision states that joint ownership of property does not prevent an individual from obtaining tax benefits under section 54-F of the Income-tax Act, especially when long-term capital gains are involved.

Case Overview:

The individual taxpayer in question filed their Income Tax Return (ITR) for Assessment Year (AY) 2013-14, reporting a total income of INR 2,97,290 from house property and other sources.

The taxpayer sold agricultural land in Bhopal for INR 64,00,000 on 03/09/2012, generating a capital gain of INR 61,65,546.

The taxpayer deposited the sale proceeds under the capital gain account scheme and claimed a deduction under 54F.

Order dated 23/03/2023 passed u/s 250 of the Income Tax Act, 1961 challenging that joint ownership of more than one residential house shall disentitle the assessee from claiming deduction u/s 54F.


Upon examination, it was found that the house where the taxpayer resided was jointly owned by her husband, which was acquired through a loan being repaid by her husband.

Additionally, another property was jointly owned by the taxpayer with their father's Hindu Undivided Family (HUF) at the time of the asset's transfer.


Ownership in two residential properties at the time of sale of the original asset does not disentitle the assessee to claim of deduction under section 54F of the Act because the assessee had two residential houses having one-half share in each on the date of sale of land. ITAT held that the Supreme Court had laid down a principle that if two views are possible, the one more favorable to the taxpayer must be adopted.


The ITAT ruled that ownership of two residential properties at the time of the original asset's sale does not invalidate the taxpayer's claim for deduction under section 54F. This decision was based on the principle established by the Supreme Court, which favors the taxpayer when multiple interpretations are possible.

At KDP Accountants, we understand the complexities of tax legislation and regulations, such as the latest orders issued by the Income-tax Appellate Tribunal's Mumbai bench. We understand how critical it is to keep current on these developments to give our customers reliable advice and help when managing tax-related issues.

The above note is subject to further study and clarifications. This note does not form an opinion from our end and before taking any decision based on above, it is recommended to consult our experts on the subject.Kamdar, Desai & Patel will not be liable for any damages (including, without limitation, damages for loss of business projects, or loss of profits) arising in contract, tort or otherwise from the use of or inability to use this article, or any of its contents, or from any action taken (or refrained from being taken) as a result of using this article or any such contents.

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