Jointly Owned Property Sale and Subsequent Reinvestment

[Chethan]

I would like your advice on the capital gains tax treatment for the following transaction:

• In Nov 2025, a residential flat jointly owned by my mother and me (50:50 ownership) was sold for INR 34 lakh.

• The flat was originally purchased in November 2018 for INR 26 lakh.

• In February 2026, I purchased another residential property for INR 34 lakh solely in my name.

• The entire sale proceeds, including my mother's share, were utilized towards the purchase of the new property.

• My mother transferred her share of the sale proceeds to my bank account, from which the payments for the new property were made.

• My mother is not a regular income tax filer.

Could you please advise:

1. Can both my mother and I claim exemption under Section 54 on our respective shares of the capital gains?

2. Does the fact that the new property is registered only in my name affect my mother's eligibility for Section 54 exemption?

3. Is it necessary for my mother to file an ITR for the year of sale even if she otherwise has no taxable income?

4. Are there any supporting documents or declarations that should be maintained to substantiate the claim that my mother's share of the sale proceeds was invested in the new property?

AI Summary

Section 54 exemption for jointly owned property can extend to both co-owners if sale proceeds are reinvested properly.
Capital gains from the sale of a jointly owned residential flat are taxable in the hands of each co-owner according to their respective share, and each may claim Section 54 exemption on that share if the conditions are met. Registration of the new residential property in only one co-owner's name does not by itself defeat the other co-owner's exemption claim, provided the other share of the sale proceeds was actually invested in the new house. Supporting documents should be kept, and a return should be filed to disclose the transaction and claim the exemption.