Investment in new property as second joint holder

Under Section 54 of the Income Tax Act, you can claim capital gains exemption if you invest the capital gains from the sale of a residential property into another residential property. Here’s how it works in your situation:

Joint Purchase and Capital Gains Exemption

Eligibility for Exemption:

To claim the exemption under Section 54, the property purchased must be in the name of the person who is claiming the exemption. Since you are the second joint holder, the property must be in your name (or jointly with you) to claim the benefit for your portion of the investment.

Joint Holders:

In your case, since the purchase will be in joint names with your daughter, you can claim the exemption for the portion of the investment you make, provided the property is in your name as well. If the flat is purchased jointly, both you and your daughter should ideally have a share in the property to claim the exemption proportionately.

Documenting the Investment:

Ensure that the purchase documents clearly reflect your investment share. This will help in substantiating your claim for capital gains exemption.

Deadline for Purchase

Completion Date:

The purchase of the new property must be completed within two years from the date of sale of the original property to claim the exemption. In your case, since the flat was sold in May 2024, the new property should be purchased by May 2026 to be eligible for the exemption.

Tax Filing Deadline:

The last date for filing the tax return for the financial year 2024-25 is 31 July 2025. However, this is the deadline for filing the return, not for the investment. The investment should be completed by May 2026 to be eligible for the exemption for the FY 2024-25.

Summary

Investment: You can claim capital gains exemption for your portion of the investment in the jointly held flat if the property is in your name or jointly with you.

Purchase Deadline: Complete the purchase by May 2026 to be eligible for the exemption.

Tax Filing: Ensure you file your tax return by 31 July 2025, including details of your investment to claim the exemption.

You can be a second joint holder in the new flat proposed to be purchased by you along with your daughter. No issue. You can still claim exemption u/s 54.

You need to complete the purchase of the flat within 2 years, i.e., by May 2026.

Under Section 54, you can claim capital gains exemption for your portion of the investment in a jointly purchased flat, even if you are the second joint holder, provided your share is clearly documented. As for the timeline, the new flat must be purchased within two years from the date of sale of the original property (i.e., by May 2026), not by the tax filing deadline of 31 July 2025.

For detailed, personalized advice, consider a phone consultancy.

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Thank you.

Shubham Goyal

The amount of capital gain invested in the acquisition of new residential house u/s 54 shall be exempted proportionately  to the extent such capital gain is invested. Thus if the capital gain invested is 20% only in the new residential house, the exemtion u/s 54 shall be limited to 20% of such capital gain. 

You may invest the balance capital gains in the capital gains account or in 54EC bonds also. 

You also have the option to invest in other residential house also, provided the capital gain is not more than Rs 2 Cr. 

Yes, you have to pay only the balance amount to CG Scheme

Assuming the property sold is a long term capital asset

- As a second joint holder, you can claim the exemption u/s 54 on the amount of actual investment made by you

- For purchase, time period is May 2026. If the amount is not invested upto the due date of filing of the ITR, you can open capital gain account with the bank and deposit it before the due date of filing of the ITR to avail the exemption

- To avail the exemption, you are required to invest long term capital gain amount in the new property. If the whole amount is not invested till the due date of filing of the ITR, deposit only the balance unutilised long term capital gain in the capital gain account. For closure of capital gain account, you have to submit an application manually to the jurisdictional Assessing officer

For detailed discussion you may opt for phone consultation