Sale of joint property...Splitting of Capital Gains
BACKGROUND:
1. Husband bought a flat in 2005 in Gurgaon with 100% own funds.
2. The flat was then registered jointly in Husband’s plus Wife’s name.
3. From 2011, the flat was rented out…..Even though the flat was in joint name, all the rent was included in Husband’s tax return every month. This was done since the flat was bought with only husband’s own money. Rent in wife’s name would have led to clubbing of income anyway.
4. In Nov 2020, the flat has been sold.
5. Since the flat was in joint name, the sale was registered in Husband's as well as wife's name, on 50% each basis…. 0.75% TDS was deducted by the buyers in both the accounts of Husband and wife….This TDS and 50% sale values can be seen in 26AS statements of both husband and wife.
6. In this year of sale also, for the period April to Nov 2020, 100% rent continued to be credited to husband’s account like always.
QUERY:
1. How should husband and wife treat the capital gains in the IT Return?
a. Should husband and wife independently show capital gains in their own respective IT returns? This would imply that Husband had made a gift of 50% of flat to wife at the time of buying/registration in 2005….. In this option, what happens to the fact that the rent has been included 100% in husbands ITR, in 2020 as well as in the past? Won’t there be a conflict of facts in the IT return, especially for FY 20-21 which will show 100% ownership and rent for husband, but 50% capital gains for husband?
b. Should husband take the entire sale and capital gains in his IT return? If yes, what happens to the sale value and TDS appearing in wife’s 26AS? How do we explain this? What happens to the TDS in wife’s 26AS?