Buying a house with your wife? Make sure the papers show how much each couple put in for joint ownership and tax breaks

By Bricksnwall | 2025-09-20

Adding your spouse's name as a co-owner solely for convenience or to get a loan without sharing costs can cause tax notices because the ownership doesn't match.

When Rohan and Meera, a couple from Bengaluru, acquired their first flat, they made sure to follow the tax rules from the start. They both paid the same amount for the down payment and the EMIs, and they did all of their transactions via their own bank accounts. The receipts from their builder and the sale deed showed that they owned the property 50:50. They kept a detailed paper trail to avoid mismatches and possible tax problems.

When a couple in India buys real estate together, it is important for tax purposes to keep a strong record of where the money came from.

Shweta Jain, founder of Investography, a financial planning company, says, "When buying a house with a spouse, make sure it's in both names and split the EMI costs evenly if you can, or in a way that works for both of you."

Why documentation is important in joint property deals: The paper trail matters

Tushar Kumar, an Advocate at the Supreme Court of India, says that the documents that need to be kept include "contemporaneous bank statements showing the transfer of consideration to the vendor, loan sanction letters and repayment schedules showing the identity of the borrower servicing the debt, and the income-tax returns and salary slips of each spouse to show their independent financial capacity."

If the donation comes from transfers between spouses, a properly signed gift deed is important to avoid accusations of benami arrangements. In the same way, builder's receipts, sale deeds, and other related documents should, as much as feasible, reflect the actual amount of money each party put in. The goal is to make sure there is no space for doubt so that the revenue can't argue that apparent ownership and beneficial ownership are at odds.

To safeguard their legal rights, they should make sure that joint ownership is explicitly recorded when they buy property with their husband. To avoid problems, they need to keep a clear record of EMI payments and cash donations. "It's also a good idea to think about a co-ownership agreement that spells out everyone's roles and possible exit strategies. Kumar explains that both names need to be on the loan papers and the ownership of the property.

Substance over form: How courts figure out who really owns something for tax purposes

The Income Tax Appellate Tribunal has made it clear in a number of decisions that determining ownership for tax purposes depends not only on whose name is on the title deed but also on whose money actually paid for the purchase.

"If it can be proven beyond a doubt through bank records that all of the money came from one spouse, that spouse would have to pay taxes on all of the income from the property, whether it was rent or capital appreciation." Kumar states, "On the other hand, when both spouses have clearly contributed, the division is done according to the ratio of those contributions."

The Tribunal, while making a decision, looks closely at the timing of debits, where EMIs come from, and how they relate to the incomes that each party has disclosed. So, the judicial approach is based on substance rather than form, which makes sure that taxes are in line with real economic ownership.

But many taxpayers make mistakes that could have been avoided, which puts them at risk of getting notices under the Income Tax Act. A common mistake is putting the spouse's name on the deed as a co-owner just to make it easier to register or qualify for a loan, without making any financial contributions. This creates a mismatch between legal and beneficial ownership.

Another common mistake is using cash in the transaction without thinking about it, which makes the audit trail weaker. It is also an issue for both spouses to claim deductions under Section 24(b) or other parts of the law, even if only one is paying off the debt.

The absence of a gift deed when one spouse has financed the other's portion, along with inconsistencies between register shareholding and actual repayment capacity, sometimes attracts examination. These kinds of anomalies not only draw unwanted notice from the Revenue, but they can also lead to charges under the Benami Transactions (Prohibition) Act in more serious cases.

How couples can stay on the right side of the law and avoid tax problems

To avoid these kinds of situations, smart people need to take several key steps. "All payments should be carefully routed through easily identifiable banking channels, in line with the ownership ratio stated in the conveyance deed." Kumar states, "When money is shared or moved between family members, properly stamped and signed gift deeds or loan agreements should be kept."

The income reported on tax returns must accurately represent the ownership share and the corresponding rental or capital gain income.

"Receipts and certificates from the builder should, as much as possible, show how much each co-purchaser contributed." Kumar states, "It is just as important to keep these records for a long enough time to withstand reopening of assessments, given the long time limits set by the law."

Source: Hindustan Times